game show idea about the lack of substantive work we were doing on the house floor when we were in the minority and the democrats were in the majority. and it was funny but boy was it pointed and it could be absolutely true. but then again, you just never know where steve was going to be. you could be on the house floor and here he is defending trafficking on the house floor. a republican defending a democrat. if you ever need a lawyer, you want steve latourette to be your lawyer because he gave an incredible performance that one time. . but he was a guy who was dean of our delegation, because everybody could go to steve with an issue. whether it was an appropriations issue, internal issue, issue for

ohio, he was a guy who would give you great advice and would work to get you an answer for the problem. so whether it was the appropriations committee or quite frankly the transportation committee where he served much of his career, was an area where he knew more about transportation and transportation issues, quite frankly than anybody in this town. he was a walking book on transportation issues. pretty hard for a buckeye to talk about a university of michigan graduate this way, mr. speaker, but it's going to be a big void for this house for not just all five, but especially steve latourette who has really given his heart and his soul for 18 years try to make this body

and our nation a better place for our kids and our our grandkids. it really didn't matter who you were or what you were about or if you had an r or a d by your name with respect to steve. if he believed in your cause, he was your partner, and he was going to do everything within his power to make sure that cause, that issue was going to be solved. he didn't always win, but he surely went down swinging every time he took that cause up. and this place will not be as good as it has been without steve latourette, jean schmidt,

steve austria, dennis kucinich and betty sutton. mr. speaker, it has been great knowing these folks. i'm pretty sure that all of them we will see again in one capacity or another. i know steve, that we will see you and jen and emma soon, and mr. speaker, with that, i think our hour's up. we have no more speakers. it's been a pleasure. it's been a privilege and honor to serve with all five of these men and women. and i yield back my time. the speaker pro tempore: the gentleman yields back the balance of his time. under the speaker's announced policy of january 5, 2011, the gentleman from california, mr. garamendi, is recognized for 60

minutes as the designee of the minority leader. mr. garamendi: mr. speaker, thank you for the opportunity. we're going to spend a good portion of this hour talking about something that is on everybody's mind, the fiscal cliff. oh my goodness, the fiscal cliff is now just -- wow, 20 days

away. so what are we going to do? some have suggested that we really have to deal with entitlements. and i'm here to agree that we can and we should deal with entitlements. certainly two of those issues, which i really don't think we ought to call entitlements but are fundamental programs here in america for americans, should be dealt with. one that some people want to put on the table really doesn't deal with the deficit at all, and that's social security. so before we even get into this discussion tonight, let's just understand or anybody that cares to take on this issue that in dealing with the fiscal cliff, social security is not the problem. the deficit is not caused by social security. social security has never been and in its present form, will

not be part of the deficit issue. it's separate and apart. it is a special program. has its own source of revenue. has its own trust fund and isn't running the deficit at all and has not run a deficit. so let's put social security to the side and say, yes, in the years ahead, maybe even next year, but probably three to four years out, social security will be dealt with, as it must, because we will have to make adjustments. but that is really not the debate about the deficit, sequestration or the fiscal cliff. coming back to the fiscal cliff, let's take up one of the very big programs and i'm not talking about the department of defense, which is one of the major expenditure items but that's not the subject for tonight. tonight, the subject is medicare and medicaid. the medicare program is a big one and it certainly is a

program that's expensive and is a program that has grown on the average faster than inflation. but in the last two years, that's not the case. and we'll discuss that in more detail later. in fact, medicare has fallen below the general rate of health care inflation. let's talk about what we can do about medicare instead of saying what we ought not do, we are going to start this discussion talking about what we can do and the president has put out several ideas that deserve the attention of the 435 members of this house and the 100 senators. because there are things that really can be done immediately to significantly reduce the cost of medicare. just in listening to my colleagues here on the floor discuss the departure of some extraordinary members from the ohio delegation, i came across

an article in one of the local hill newspapers. and this article says "g.a.o. hits medicare and medicaid wasteful spending." turns out that the g.a.o. issued a report that medicare has, in their estimation a $28 billion fraud wasteful spending in the year 2012 or 2011. $28 billion. and in medicaid, some $21 billion. now, the president has suggested that one of the things we ought to do to reform the medicare system and the medicaid system is go after waste, fraud and abuse. well, there you have, what, 50-plus billion dollars of annual fraud, waste and expenditure in the medicare system. that goes a long way to solving

the medicare problem. and we ought to do that. and in fact, a lot of that was done in the affordable health care act. and systems were put in place and working today but there is even more that can be done according to the g.a.o. and if we are going to start dealing with medicare, why don't we start with that issue and perhaps $50 billion or if you want to be conservative, $30 billion or $40 billion that we can reduce immediately. and this will take a few federal employees to do that. in the affordable health care act there was a provision that added a couple of thousand employees to the i.r.s. for the specific purpose of going after medicare and medicaid fraud. well, they were added and then our republican colleagues, in a fit of -- well, just in a fit,

decided they would save a lot of money by eliminating the men and women that were supposed to be hired to go after fraud. they tried to do it and they weren't successful. i'm going to name a couple of other ways we can reduce the cost of medicare and i want to turn to my colleague from illinois to expand on some of these issues. how about drugs? would you believe that the federal government has no power to negotiate the price of drugs for seniors? in the medicare program? it's true. it's tru. congress passed a law back in 2003, 2004 program that denied the federal government to negotiate prices. we could save a pile of money right there. there are some other things we could do. we could penalize hospitals who have high infection rates,

re-admission to hospitals. well, the affordable health care act is already doing that and having an effect. we could also deal with the issues that occur with unnecessary payments. we can reform the system in the way that payments are made so they are more efficient and more effective, and those have been proposed by the president. in fact, there are many, many things that can be done to significantly reduce the cost of medicare without, without doing the onerous damaging proposals that have been made by many of our colleagues on the republican side, increasing the age to 67 and we'll discuss that in much more detail in a few moments. such as going after the privatization of medicare, some really bad ideas are out there and we don't need those bad ideas. what we need are some good solid

ideas. and let me turn to congresswoman schakowsky. she was on the congressional committee -- >> simpson-bowles committee and focused specifically on social security and medicare. she's joining us tonight with an extraordinary background and information on this. january, let's talk for a few minutes about your experiences and what you think we can do. ms. schakowsky: thank you, congressman garamendi for leading this hour where hopefully we can get the facts out about medicare and social security. and i want to concentrate on medicare. first of all, i want to ask this fundamental question, do we really think that the united states of america is poorer today than we were seven years ago when social security -- 70

years ago when social security came into being. that the united states is really poorer than 50 years ago when medicare and medicaid came into being? the answer is simply no. the economy has grown 15 times over since social security was enacted and it was enacted because this country decided that it was really important for us to not have poor houses for our elderly in this country, that the medicare and medicaid came in that insurance companies really didn't want to ensure old people and that they weren't able to get the health care that they needed, and that the right thing to do for the richest country in the world, which we stillr is to set a priority that we're going to address the needs

of the elderly, not for free by any means. people pay every month, every pay check that they're working into social security and we created an insurance company for americans, an insurance policy for americans that if you pay in when you retire, that money will be there for you. and as you pointed out, we have $2.7 trillion in the social security trust fund right now. if we didn't have that, that means that our zeist -- deficit would look $2.7 trillion worse than it does. so social security should be off the table. medicare, too. every single pay check, people pay in, but the difference is, when you get medicare, you continue to pay. and i want to talk a little bit about the truth of what's going on in medicare today and the

myths. talk about means testing social security. guess what? we do. we already means test social security. i want everybody to understand that. we means test social security. medicare part d premiums, that's for doctor-outpatient and part d, prescription drug premiums, are already higher for individuals with incomes over $85,000 a year. now, let's remember we are calling middle class for everyone else up to $250,000, but for medicare purposes, people who make $85,000 or more, they're going to pay extra costs arranging from $504 a year to $2,270 a year for part b and $

139 to $797 more a year for part d. we means test medicare. . by 2020, with no adjustments, they're expected to rise from $ 200 to $6,000 more. higher income households pay more for future medical benefits during their working lives as well. there's no cap on the tax that you pay into social security -- into medicare. and a person with $2 million in wages pays $58,000 into medicare system of during their working lives and when they retire and take medicare benefits, we means test

medicare. did you want to say something? mr. garamendi: let me interrupt for a second you started the discussion with social security and i think what you meant was medicare which is where you've been taking the discussion. medicare part b is means tested and has been since its inception. many schakowsky: we means test medicare, exactly. mr. garamendi: and the amount you pay into medicare is higher as your income goes up. ms. schakowsky: so during our working lives and when you start on medicare you are paying more if you make $85,000 or more. mr. garamendi: so the tharget you've got to means test this program is, yes, and we dfment ms. schakowsky: now, we means test medicare for the top 5% of

beneficiaries. under proposals to cover 25% of beneficiaries, call them higher income, means testing would start at $47,000 in income. really, these are rich seniors in covering 10% of medicare beneficiaries would hit individuals with $63,000 in income. are those wealthy seniors? no. we means test medicare right now for people who pay -- who earn -- who get income over $85,000. here's the other thing. a couple more things, points i want to make. there is no cap right now on out of pocket costs in medicare which today average $4,5000 for people over 65 -- average

$4,500 for people over 65 years old. so the out of pocket costs are very high. the average amounts to about 20% of their income. out of pocket already system of medicare costs are already high. the idea now of going further down in income levels to means test medicare beneficiaries makes no sense whatsoever. the other thing i wanted to point out is half of all seniors live in households with less than $22,000 in income. so here's the part i don't get about the fiscal cliff proposal. it seems as if the trophy that the republicans want in exchange for asking people whose income is above $250,000,

even though they get a tax break on that first $250,000, ask them to pay a little more, the trophy in return is to ask senior citizens whose median income is $22,000 to pay more? why is this a quid pro quo? why is this fair? why is that the trophy? why is that the exchange that makes sense? the american people say no. say no. medicare, social security, medicaid, these are programs that keep people healthy. raising the age of medicare, really? that's why we have medicare in the first place. insurance companies don't want to insure people and the center for american progress says that if we did that in a single year almost 435 seniors would be at

risk of becoming uninsured. is this the goal? i am realy confused about these proposals that somehow equate, really the wealthiest top 2% in our country with extracting something from the poorest adults in our country. seniors and persons with disabilities. mr. garamendi: your points are very well taken. it seems as though you call it a trophy. the argument made by some is that we ought not raise this top tax rate but you ought to get the medicare program, the beneficiaries and make them pay more and as you said, they're mostly middle class and poor. so what's that all about? and raising the age to 67 is really stupid.

there's no other way to describe that. i was insurance commissioner california for two years. you raise that age to 67, a lot of bad things will happen. first of all, people between 65 and 67 are not likely to get insurance at all let alone affordable. for the reason you said. that's the population that you -- that is almost uninsurable under the present system. even with the affordable health care act, they're going to wind up paying a huge amount of money and you're shifting the cost to them, to their employers and to state and local governments. you've save nod mup. you've probably increased the cost because the benefits that go to seniors in the affordable health care act are not available to them. such benefits as annual checkups, medical services keeping people healthy. i'd like to come back to that in a little while. i notice our colleague from the great state of texas is with us. thank you for joining us once again to talk about something i

know you've spent your career here in congress working on. social security, medicare and medicaid. please. ms. jackson lee: i thank the gentleman from california and i thank the gentlelady from illinois for her persistence on this issue, congresswoman schakowsky along with congresswoman matsui co-chaired a task force that was very effective in making sure the democratic caucus and really members of congress had an understanding of the safety net but also the issue around the word earned. for some reason or another, when you put the benefits of individuals on the altar of sacrifice it's because they didn't earn anything. you can sacrifice them. one thing that congresswoman -- the congresswoman emphasized is the idea that social security is earned, medicare is earned and to a certain extent

medicaid is, on a different structure. to the gentleman from california, i want to speak directly to what you've said as a insurance commissioner. i want to stay narrowly focused, let me say there are enough bipartisan voices right now to pass the senate bill. i want to thank congressman walz who drew up a petition with 178 democrat exnames and we welcome our republican colleagues to get on. but the point is -- i want to change my strer knack lar, i want to change my language. 100% of americans will get a tax cut. if we pass the senate bill -- mr. garamendi: let's describe the senate bill. ms. jackson lee: the senate bill, $250,000 and below, whatever you make up to $250,000, received the continuation or a tax cut and the remaining obviously expire. simple premise that means 97% of our businesses today, that

means all the businesses on main street and cities and towns will be protected going into 2013 tax year, the 2012 tax year. but what it means is middle class americans will now have a 2,000-plus, $2,200, going into january. i want to move to eligibility. that's been batted around. i really want to come here today, i was home over the weekend, i said, i have to get to washington to convey the thoughts and the minds of my constituents not only the average citizens but doctors who i sat down with yesterday to ask about this question. but here's my point. now you can look at'9" globally, then i'm going to narrow it down. globally one would say that we're living longer. of course women are -- this is the actuarial genius here. you know the actuarial table

you teal with. women are living longer, it's always been a tradition, etc., but the body politic is living longer maybe because they're healthier. that is not the case in the span of what we're speaking of. what we're talking about tpwhreblely or nationally are people who -- whose beginnings are different, whose lifestyles were different, now i don't know that the family farmer, and i'm not picking on that group of people, they work with their hands. of course they work with their minds, they have to have a budget, mange things work but they're in the outdoors. foresters. some would say that's a healthy lifestyle. i don't know if if -- until you walk a mile in their shoes. those who work in the coal mines of west virginia. those who are in the sanitation department of our municipal cities. so those who work in concrete, in the building trades. those individuals, those who work in the energy industry in all shapes, forms and sizes. those who may be in the

vocational trades. maybe even nurses and nurses aids, who are lifting patients all day long. thank god for them. we see them all the time when we're visiting the sick and our relatives or we're in the hospital system of what i'm saying is, you cannot have a cookie that fits all. you cannot immediately jump to entitlement reform between now and december 31. here's a solution. the bipartisan voices have said pass the senate bill or pass the elimination of the tax cuts on the top 2%. but i believe that 100% of americans will get it. we cannot then jump to entitlement reform now. it would not be wise. it is not prudent. it does not work. when you talk about 65 to 67, that's a lifetime. because what you do as the gentleman has said york uh throw seniors into the marketplace, you save a buck

and they have to spend two bucks, three bucks, four bucks and then on top of those four bucks, they'll have doored slammed in their faces, the affordable care act was premised on a 65-year-old medicare admission, except for those who are december abled and therefore now you want to skew it, you've already claimed that obama care is going to raise prices. look at the projection of cost to the senior, trillions of $s that they will pay in the open marketplace, but more importantly, how many of the poor senior, not having the money to go into the open marketplace will drop dead? i'm being colorful because in terms of your lifestyle, some people struggle to get to 65. and it makes no sense that they should be on the altar of sacrifice, i'm passionate about this because i don't understand why we jump sod far. and i say, members, let's be

deliberative. you cannot delow it out and say that's what we're going to do when you don't know the numbers. you don't know the ultimate results. you have not done an analysis on what seniors of this age, what are their particular work histories, maybe we have -- maybe 40 years, no let me go 20 years from now, we'll have all white collar seniors. i don't know what we have now. and therefore i can't judge that 65 for one person is 65 for everybody. let me say this to my good friends that are here. let's take off raising the medicare age off the table. off the table. i'm delighted to see people who are, over 65, 72, 80, 42, fine. but sometimes we do not represent a microcosm of america. and there are constituents and let me finish on this note. i sat down with doctors and posed the question. doctors have a sense of pride,

they like their work, and they think they can keep us healthy and make -- they represent a number of things to me. if we fail in nutrition -- stay on a nutritious diet or exercise, it's possible. they shook their heads. they said it's unbelievable. they said it won't work. it's not a good answer. they were against raising it on the basis of medical grounds. so let me just say this. i hope that we stand firm. our caucus, i hope we work with the white house. i know they're speculating over a number of opportunities and options. my perspective is you go for the tax relief and you put on the table for deliberative consideration what is the best approach to have medicare savings and to a-- provide for

the american people. i can't fathom burdening seniors with raising the eligibility age for me care. mr. garamendi: thank you for bringing this issue back and i don't want to leave it right yet. . our colleague from illinois started her discussion with the values, the values that we americans possess back in the 1960's, when medicare began. that was the value of caring for each other, particularly caring for those seniors who at that time had 50% in poverty, i think 70% without insurance, and a very bad situation. i remember when i was a young -- not even teenager yet, my father took me to the county hospital. you mentioned the word poor house, that's what it was. that is eached in my mind to

this day what was happening in that county hospital. just row after row of beds down a long ward, the cries, the sounds, the odors, unbelievable. that was the only care available and medicare came in and we moved to a different place. our values as americans expressed in the most meaningful way taking care of seniors. the issues of poverty largely eliminated. now that's not fair. the issue of poverty among seniors substantially changed. we still have too much poverty. but medical services available. quality medical services that have extended the life of many. and the point you were making about not everybody is so very, very true. as you were talking, i was just thinking, i read something about

this. though increasing overall life expectancy at 65 has not increased equally across the social-economic status, from 1977 to 2007, life expectancy for the top half of earners increased by five years. but only one year for the bottom half of earners. so once again you have this disparity class if you will. white men without a high school diploma have a life expectancy of 65.7 years as opposed to 8.4 years. once again, two different societies in america. since 1990, life expectancy for the least educated whites has decreased, decreased by four years. and now the argument is that we can increase the medicare

eligibility age to 67 because people are living longer. hello? who is living longer, those who have higher incomes. those who don't, those who work with their hands, whether they are a made cleaning a hotel room, a farmer or a coal miner or any other task which is labor-intensive and physical labor-intensive. by the time they are at 65, their body is broken and to deny them the opportunity, i can tell you everybody i meet who's not 65, wants to live long enough to get to 65 and medicare. and so for our republican friends, their principal negotiator has put on the table, the speaker of the house has put on the table, let's raise the

eligibility age. january, you were talking about this earlier. this is a fundamental dichotomy in how we value our seniors, how we value each other, how we are compassionate. ms. jackson lee: can i say one thing and then step away, i'm glad you used the statistic of a white male, because i want this to be holistic. you did it on income. there are other disparities between african americans, asians and hispanics on a number of factors. on the population you just mentioned, i assume there are numbers for white women and then there are health disparities, nothing that would make them different as americans but makes you think closely about a cookie

cutter approach how medicare could be and to raise it to 67 is dangerous for the diversity of this country and remember what we said, we want to be for the 100%. i thank you for allowing me to say that point, because i think our fight is a noble fight and not against anybody, but it is for something and i would like to recognize that this is not a good idea. i thank the gentlelady for yielding. mr. garamendi: i hope you will stick around. january. ms. schakowsky: i wanted to make the point that there are many people who throughout their life have not been able to afford health care and so they really are in need of health care when they turn 65. i have people coming into my office every day, at least once a week and i bet this happens to you and most members who say, i

just hope i make it until i was 65 because i can then have that fixed or this fixed, causing such a loss in my lifestyle and possibility -- pain. finally going to be able to take care of it. so, a couple of things. i just want to reiterate that are just myths. what i already said, we means test medicare. number two, raising the age of eligibility, according to -- and you know, our democratic leader wrote december 11 -- is that today -- the truth about medicare age. she wrote an excellent "usa today" article and in it she said one expert from the center of the budget priority, raising

the age, would not only constrain health care costs, but would increase them. and our leader points out that the kaiser family foundation estimates that higher state and private sector costs that result from raising the age would be twice as large as the total federal savings. so we aren't even doing ourselves a favor when it comes to expenditureses, the cost of health care if we raise the age. as you said, it's a really bad idea. i do think that a lot of people, especially younger people, do think that once you get to 6 , you just get this -- 65, you just get this health care benefit. it is a policy that seniors are paying for. it is a good insurance policy

and it is far more efficient with an overhead of 3% compared to private insurance which could have as much as -- reaching up to 20% overhead costs. so medicare works very well. and it's popular for very good reasons. but as you pointed out, we can control the cost of medicare. i'm not up here saying, don't do anything about medicare. we aren't going to touch medicare. yes. we can, as we did through obamacare. $716 billion, democrats were hit over the head with that number saying we funneled that money and stole that money from medicare, implying that we took it from beneficiaries. the opposite happened. we were able to create more efficiencies in medicare,

stopping our subsidies as a private insurance company, beefing up our fraud division even though as you pointed out, we can do better. save $716 billion from medicare and improve benefits. and that was just the beginning. you know, i was here when we passed medicare part d. the truth is, the pharmaceutical companies, the drug companies, got language put into the bill, written into the bill that said medicare, unlike the veterans administration, shall be prohibited from negotiating for better prices with the drug companies. that process -- that cost us about $250 billion over 10 years, the the fact that we can't negotiate for drug prices with the drug companies who are

making money hand over fist from medicare part d. if we were to make a change like that as the veterans administration does, drug prices would be lower for the government and for medicare beneficiaries as well. it would be a win-win in terms of lowering prices. yes, the pharmaceutical companies aren't going to like it, but most countries already negotiate for lower drug prices. why shouldn't we do the same, especially for medicare? mr. garamendi: only in a free-market system. ms. schakowsky: right. mr. garamendi: a law to prohibit negotiating prices, which is the essence of a market system. you raised a couple of points that i want to use the chart to expand on. obamacare really significantly

enhanced benefits to medicare recipients, 65 and older, they got some really important benefits. you mentioned the drug benefit, part d, the doughnut hole is being closed and that is worth some $55 billion a year to seniors. there are other things that are in the affordable health care act that have already saved vast amounts of money to the medicare program. for example, annual wellness visits for seniors. why is it important? well, you find out certain things like you have high blood pressure and you take a pill. we ought to be negotiating that price, but you take a pill and suddenly, you are able to reduce your blood pressure and avoid a stroke, avoid some other kind of medical incident. you may find you are on the path towards diabetes or other

long-term illnesses, so that wellness visit becomes exceedingly important and treatments are available. here's what happened. because of obamacare, the inflation rate in medicare has dramatically reduced over the years. you take a look at this particular chart, and it shows beginning in 2005 and now 2012, the annual increase in costs, the inflation rate in medicare. it peaked in 2005 and began to come down. here is obamacare, and we have seen a decline to about 2.5% inflation, which is actually less than the general health care inflation rate in the economy. and this has occurred because of multiple factors, perhaps, and it's arguable, but we think the

major factor is the advent of obamacare or the affordable health care act and for medicare recipients that reduce the cost of medical services. ms. schakowsky: i think it's important to point out, too, that the full provisions of obamacare haven't even rolled out, although these preventative services are in place and look at what has already happened. mr. garamendi: as the other services roll out, they will affect the medicare population but affect the general population and should because of the availability of insurance and the availability to get to a doctor and get the continuation of care, should bring down the overall inflation rate for health care, which will dramatically affect medicare as well. so, what we are on is a track that is reducing, what they call

bending the inflation curve, it's happening. and here's the most dramatic chart that i have seen on this issue, that we are, in fact, bending the cost curve. and perhaps, even more important , senior citizens are healthier. they're healthier. they're getting better care and getting more care. there are a couple of other things that we really -- ms. schakowsky: let me just say on that point on the cost savings, that's why when the affordable care act passed, the congressional budget office estimated that it saves -- how are we going to afford that -- that it actually saved a trillion dollars over 20 years in costs to the government. mr. garamendi: very good point. very, very good point. but they were calculating an inflation rate that continued at this level. they did not calculate a

reduction in the inflation rate and in the most recent estimates of cost savings, they are looking at this difference here, a lower inflation rate. and this saves billions upon billions of dollars in the medicare system. so we are seeing it. i don't want to let a point go by that you raised, and yes, all of us democrats were whacked over the head in the elections about the $720 billion, i was, you were and i suspect the rest of us were also. the $720 billion reductions in medicare did not come from benefits. in fact, the benefits were increased, just as you said. i don't know how many times i have said that over the last several months. it didn't come from there but three areas. you said this earlier. it bears repetition. it came out of the pockets of the insurance companies that were providing the additional

medicare insurance coverage. . secondly it came out of fraud and abuse and thirdly it came out of payments to medical providers not performing good services. specifically one of the biggest were hospitals that had high infection rates. affordable health care act said we are not paying for the sec admission when there's an infection acquired in a hospital. this is really good news to ben fish years because the hospital goes, oh, you mean we have to pay for the cost of a readmission because of an infection? the goth is not going to pay for it anymore? maybe we ought to clean up our act. maybe we ought to have hygiene in this hospital. and we're seing a significant decline in the infection rates -- in hospital infection rates. not expensive for hospitals to

do but extremely important for every individual that go into a hospital whether you're on medicare or otherwise. hospitals are paying attention now to hygiene. there are other inexpensive things that keep people health yid and redution the cost of med air canned -- medicare and general health care. ms. schakowsky: the real benefit of the affordable care act is that we are making the system more efficient. the health care system in the united states of america is very inefficient. we're going to be rewarding outcomes. rewarding value. good performance. rather than getting, the doctor sends a bill, the hospital sends a bill, medicare sends a check, we're going to be rewarding efficiency and good

practices now. i think that that is what everybody wants. we want better results for lower cost. mr. garamendi: there are simple things in the affordable care act that do reduce the cost. s the continuity of care. this is the kind of thing you're talking about. the management of a debilitating illness, for example, diabetes. if die bee tuss is -- if diabetes is managed, the expensive things that occur to individuals are delayed or are not happening at all. they cost a little up front. keeping in touch with the patient, making sure they're taking med cases, making sure they're doing the checkups they

need on a regular basis. how about right now. i don't know. there's a whole bunch of people in this room, 435, they're not here today but how many have gotten their flu shot? you want to recuse the cost of health care, get your flu shot. i think i'll go do that tomorrow. i know, i've got to do it tomorrow, i i'll get my flu shot. these are ethis kind of things that reduce cost, and the affordable health care act does that. go ahead and make your comment then i want to turn to the pernicious things being proposed. ms. schakowsky: i want to say that the vast majority of americans, this is not about party. this is about people who know the realities of life, democrats, republicans, i'm

sure some people will identify as tea party. they don't want to see this congress. this is overwhelming in every single poll. it's not because people are greedy. they need these programs, these treasures of our american system to live a decent quality of life. they work hard, pay into the programs, dovering they're supposed to do and then when they're either disabled or they're past 65 years old or in the case of social security 67 years old, want to be able to, the fruits of their labor, to

be there for them. and when they get medicare to pay dearly for those services. i think it's important to remember that. mr. garamendi: we all ought to describe all 435 of us as politicians, that's what happens when you get elected. as politicians we often read the polls. let's see here. 67% of americans opposed to increasing the age from 65 to 6 . 71% of democrats. 68% of republicans. 62% of independents. that's pretty overwhelming. in terms -- just to back up what you were saying about the american public, they viscerally, internally understand how important medicare is. not just for themselves.

they have parents, many of whom are you -- now 65 or older. my mother is 92, a medicare recipient. she depends on medicare for hospitalizations. fortunately she hasn't had an incident for more than two year bus when she did, medicare was there to provide the necessary services for her. and so it is with all of us who have parents in the medicare system. we understand this and we really want to make it quite clear that as democrats, we are in sin cronyization with the president on this issue. he has put forward specific proposals that over time will reduce the cost of medicare. there was one proposal put forth by the speaker of the

house to raise the age to 67, but that's a nonstarter. i'm not going to go into actuarial explanations of why it doesn't make sense for employers who will wind up paying more, makes no sense to the medicaid program which you've already talked about and makes no sense in saving money. the total cost to the system would increase. the cost would be shifted, to be sure. no, not so. i guess i will do a little actuarial work here. those people 65 to 67 years of age than people 6 and above. you eliminate the healthy people from the risk pool and guess what happens to those who are left? it's more expensive per person in that smaller risk pool. what you want to do in all insurance programs is increase the size of the risk pool so the cost is shared among a

larger population of people. what this proposal does is exactly the opposite. it shrinks the risk pool, bring into that -- keeps in that risk pool less healthy people, more expensive and those who are more healthy are outside. they are now shifted onto the new exchanges that are going to be created. so the cost in the exchange is increased. the cost per person for medicare is increased. what's going on here? bad idea, bad concept. ms. schakowsky: your 92-year-old mother, when she go into he hospital, if she didn't, she probably does have a supplemental policy, the first day in the hospital, the co-payment, which some seniors have to pay out of pocket is well over $1,000. and so these out of pocket costs and medicare, let's remember, does not cover most

vision and hearing or dental and so you know, seniors still are left with not only their premiums and co-payments and deductibles but lots of things that still are covered by medicare. the cost of health care to seniors today, this is no entitlement making it sound like they're getting a freebie here. it's very, very expensive. we want to make medicare better. we want to enhance some of the benefits. mr. garamendi: the word entitlement is misused for both social security and medicare. that means when you reach a certain age the program is available to you, it's not a freebie. for men and women in america who are 65 and older and work they continue to pay what

amounts to a health care premium. the payroll tax. they're paying that if the first paycheck they get until the last one they receive. and then, when they're no longer working, as you so connectly stated, medicare is not -- does not cover the total cost. so they're going to continue to pay, they're probably going to be paying for supplemental program, sup remital insurance program and they're going to be paying out of pocket. a couple of other things that have been proposed, i want to cover those because of they're very important. it's been proposed that the medicare system, the cost of the medicare system can be reduced by giving every senior a voucher. a different word but exactly the same thing is premium support. which says the medicare system as we have known it for nearly 50 years is terminated, gone, and seniors, 65 or 67, they get

their way, would be thrown into the private health insurance market. i cannot imagine a worse situation for a senior. the private insurance market is not interested in caring for seniors. they don't want to -- ms. schakowsky: that's why we have medicare. mr. gare men tee: -- mr. garamendi: yet the voucher system is privatization of medicare. it's the termination of this guarantee. an a senior has to go out and negotiate on their own for health insurance policies. good luck, mom. you're 92 years old. good luck get act health insurance policy. from any private health insurance company. it won't happen. it won't happen. and so for those proposals, they are wrongheaded, they are cruel, they are expensive to the individual, and they ultimately will lead to a system in which the health

insurance will not be available to seniors. that's a proposal that has been given life and was actually passed the house of representatives. ms. schakowsky: it's part of the ryan budget. mr. garamendi: it is. it has passed the house of representatives twice. not once, but twice. so this is not just some idea floating in the ethey are. this is a real proposal. that is sitting in the senate. fortunately it's going nowhere there. but these kinds of programs are there. the other program we've talked around this issue, that is a flat out assault on the benefits. we're going to cut out drugs, cut out one or another of the benefits that are in medicare. and the package of benefits in medicare is designed to provide a continuity of care is that something that is common is going to get covered.

hospitalization. doctors kear. and annual visits to the doctors. very, very important. let me be clear that as democrats, we understand the necessity of reducing the cost of medicare. we understand that and in fact, we have done it. the democrats have done it. we have taken action to reduce the cost of medicare. and simultaneously maintained the benefits and improved the benefits to seniors. . that is what we have done and will continue to do it. things that i talked about at the very outset. are very real. we can take additional steps. we can do more. the president has proposed it. and the democrats stand ready today to take up those issues and pass them out of the house. get them to the senate and say, we can do more to reduce the

cost of medicare and simultaneously maintain quality care for seniors and the benefits that they have spent their lifetime paying for. payer fog those benefits -- paying for those benefits. we can do it. >> we can do it and i hope everyone will stand with our president who has said that we're not going to raise the age of medicare and that the republicans now first have to agree that we're going to ask the wealthiest people in our country to pay a bit more. ms. schakowsky: and not to begin with the least able, to pay more , the poorest adults, seniors and persons with disabilities. mr. garamendi: our colleague, sheila jackson lee, before she left, she said, she brought this issue up, on the house -- in the house today is the tax program that would continue the tax reductions for the middle class.

ms. schakowsky: and for the first $250,000 for everyone. mr. garamendi: exactly so. all we need to do is to pass that. the other alternative, which has been proposed, is to keep the taxes low for the super wealthy and to pay for that out of the pockets of seniors. we're not going there. and we shouldn't. jan, thank you for sharing this evening with us. this is an important issue. ms. schakowsky: thank you. mr. garamendi: thank you. we yield back our time. the speaker pro tempore: the gentleman yields back. does the gentlewoman have a motion? ms. schakowsky: i move -- the gentleman? go ahead. i move that the house adjourn. the speaker pro tempore: the question is on the motion to adjourn. those in favor say aye. those opposed, no. the ayes have it. the motion is adopted. and accordingly the house stands adjourned until 10:00 a.m.

toore: the

chair recognizes the gentleman from ohio, the speaker of the house, mr. boehner, for five minutes. the speaker: mr. speaker, last week republicans made a serious offer to avert the fiscal cliff, and most of it was based on testimony given last year by president clinton's former chief of staff, erskine bowles.

and as mr. bowles himself said on sunday, we have to cut spending. well, he's right. washington has a spending problem. let's be honest. we're broke. and the plan that we've offered is consistent with the president's call for a balanced approach. a lot of people know that the president and i met on sunday. it was a nice meeting. it was cordial. we're still waiting for the white house to see what spending cuts the president is willing to make as part of the balanced approach that he promised themerica people. where are the president's spending cuts? the longer the white house slow walks this process the closer our economy gets fought fiscal cliff. -- gets to the fiscal cliff. here's what we know. we know that the president wants more stimulus spending and an increase in the debt limit without any cuts or reforms. that's not fixing our proble

frankly, it's making it worse. on top of that, the president wants to raise taxes on many small business owners. now, even if we did exactly what the president wants, we would see red ink as far as the eye can see. that's not fixing our problem either. it's making it worse and it's hurting our economy. i think the members know i'm an optimist. i'm hopeful we can reach an agreement. this is a serious issue and there's a lot at stake. the american people sent us here to work together toward the best possible solution and that means cutting spending. if the preside doesn't agree with our approach, he's got an obligation to put forward a plan that can pass both chambers of the congress because right now the american people have to be scratching their heads and wondering whe

minority leader, ms. pelosi, for five minutes. ms. pells: thank you very much, mr. speaker. i -- ms. pelosi: thank you very much, mr. speaker. i'm glad that our speaker has brought the fiscal challenges to this floor. it's been long overdue. we have been calling on the speaker to bring forth middle-income ta cut now foa very long time. in fact, since last summer when it passed the united states senate. the president stands ready and poised with his pen to sign it. democrats in the house have a discharge petition to bring that bill to the floor. what stands in the way is an act on the part of the republican majority to bring a middle-income tax cut to the floor of the house. which across the country has almost universal support and which i think in this body, given the right to vote for it

would have overwhelming support. up until know, everybody in the country, in pact in the world, have been talking about what's going to happen, those who pay attention to such matters, what's going to happen to the -- in the budget debate in the congress and with the president . at last thasubject comes to the floor. what i would respond to what the speaker has said, though, is to set the rord straight. thfact is that the president has and democrats agree with him agreed to over $1.6 trillion in cuts. in the budget control act and other acts of congress in this particular congrs. $1.6 trillion in cuts. where are the cuts? they're in bills that you, mr. speaker, have voted for. secondly, on the issue of the entitlements, with the affordable care act and with

legislation and the president's suggestions, provisions in the president's budget, it amounts to over $1 tllion in savings in medicare. over $1 trillion in savings which have been redirected to prolonging the life of medicare, making it stronger for nearly a decade while increasing benefits for our seniors and those who depend on medicare. not reducing but increasing them. there's been a massive misrepresentation about what that is, so i want to set the record straight. so in terms of spending cuts, we're on the record having voted for over -- about $1.6 trillion. in terms of entitlement reform, over $1 trillion already and more savings to be gained in further discussions on the subject. strong down payment. what is missing are two elements that the president put

forth in his budget -- growth, investments in infrastructure. yes, the president has called for investments in infrastructure, to build the infrastructure of america and to create jobs, to grow our economy. and where are the revenues? where are the revenues? regardless of theuts, the changes in entitlements, more is demanded in terms of what seniors would have to pay into medicare and at what age that would happen while the republicans refuse to touch one hair on the head of the wealthiest people in our country. the public overwhelming, 2:1, supports the president's initiative for extending the middle-income tax cuts whereby 100% -- 100% of u.s. taxpayers get a tax cut. above $250,000, people making

more than $250,000 a year will be asked to pay a little more to pay for the fiscal soundness of our country, to pay for our country, the support of our troops. the pillars of security for our seniors. the education of our children. for the safety of our neighborhoods. this is just asking them to pay a little bit more while they continue to get the same tax cuts that everyone does. 100% of the american people get a tax cut, the upper 2% are asked to pay a little bit more. so i thank the speaker for finally at least uttering the words on the floor of the house about what is -- what the decisions are that need to be made. again, we committed to the cut. we acted upon the entitlements. the president has more in his budget. all of this would be a down

payment for as we go rward into the next session of congress to talk about tax simplification and fairness, how we can have lower rates while plugging up loopholes and having a tax code that is -- encourages growth in our country. but that's along the scussion. as we address the issue of how we strengthen our entitlements, not by diminishing benefits but by getting more for what we are spending. so social security, any changes in social security should be left to strengthen social security. if it's medicare, any changes should be there to strengthen medicarenot to underwrite and subsidize tax cuts for the wealthiest people in our country. so, again, i welcome the speaker's statement that he wants to solve the problem. the presidentas put forth his

bufpblgt which has his initial -- budget which has his itiative in it. he said he's willing to make some changes, but it's really important that any changes not hurt the middle class. it comes right down to this. again, i've said it's not about the price of the high-end tax cuts. it's about the money that it generates. . it is not to burden the middle income in order to have bigger tax cuts at the high end. those hi-end tax cuts only increase the deficit they have not created jobs. it's simply unfair and it doesn't work. so hopefully the clock is ticking, we are getting closer to the holidays, and that means closer to the end of the year, which is fraught with meaning in terms of time and the rest of this. i don't think there's any

reason for us not to come to the table to make an agreement, to give confidence to consumers in this holiday season, to the markets at their end of the ar decisions so that we wil have the growth, the growth, the jobs that produce revenue, that job, that approach is the way to reduce -- reduce the deficit. create jobs to reduce the defit. want to fix the deficit? grow the economy and do so in a way that makes responsible cuts , strong investments for our seniors, pillars of economic security for them and for their families. it is not a time to inject even more uncertainty into the lives of the american people and the economy of our country and what that means globally. it simply isn't the time. many of these eas e bad at any time, but they are particularly harmful at this time. so again, i thank the speaker for bringing the issue finally to the floor of the house of

representatives. i look forward to how we can move quickly because time is of the essence and every day that we can remove all doubt about the full faith and credit of the united states of america, our investments in the future, our creation of jobs, and our respect and support for the economic -- and help the security of our seniors. every day we can do that, put

though small businesses will be impacted by the tax cuts that incur on january 1. many will not be able to continue to hold that business in the valley. feel have to pay a higher percentage. surrounding many of these communities around the countries are farms and ranches who are in the exact same situation. for those farms and ranches that have been within the family for generations, they have savanna -- they have survived through drought and fire. they have faced also to things over the decades. the biggest threat to them has been from the government. it he raised the tax -- if we raise the taxes on them, there are a number of farms and

ranches that would be impact it. there are only 100,000 of these arms and ranches with access of over 500 million dollars. if you jot that down to $1 million, many farms and ranches would be impacted. many would have to sell out after generations because of government and nothing else. >> the republican leader said that the federal government spent $1.6 trillion. 10 years later we have managed to double that to $3.8 trillion. this is clearly a spending problem. the president over and over again said over the course of the campaign that we need a balanced approach. very specific on raising taxes and no specifics on the cutting of the spending. no specifics on the sequestration. when is the last time -- we

heard some discussion were the taxes come in and not making the cuts. that does not sound like a balanced approach. we need to have spending cuts. that will be part of the escutcheon. it has to be part of the discussion. when the president gets the tax increase -- by the way, almost all of the bush tax policies appeared to be the best policies in the world. but 10% bracket, the marriage penalty, the child tax credit, all of these are things that the country has to have for everybody -- the taxpayers that benefited from those tax policies that we put in place in 2001 and 2003. the only thing that seems to be solving the problem -- there is

no real discussion on what you do about spending. that does not sound like a balanced approach. >> everyone knows there is a difference between governing and campaigning. the president cannot seem to give up campaigning. we get it. the president won the election. but now the american people expect him to step up and deal responsibly to help with our country's fiscal problems. one of the indications that shows he is not serious about solving this fiscal cliff is his demands made for additional revenue without any commitment whatsoever to use that additional revenue to either pay down the deficits or the dead or to use it -- or the debt would ease the to sure off social security and medicare. the american people want us to deal with this responsibly.

the president needs to reconsider what this might do not only to the hundreds of thousands of americans that would be put out of work and would be unnecessarily harmed, but also what it would do to his second term in office given the damage it would do to the united states economy. >> can you respond to those who say there is not enough time to reform -- to make reforms for the end of the year. what specifically are you looking for from the president for an agreement? >> i have said repeatedly and most of my colleagues have said as well and we will say it again. the only entitlement reforms are needed to save medicare and social security -- we know what they are. it requires the courage to do it and not more studies.

tax reform cannot done between now and the end of the year. i believe that we have a bipartisan view that after 25 years, it is time for tax reform again. that will take time. what the president is trying to achieve in the tax rates, the law is stacked in his favor. the point that we have all made repeatedly is that you cannot solve this problem. we have a debt the size of youor economy. you cannot leave the country behind to our children until you make the entitlement programs meet the demographics of our country. we have known that for years. when are we going to make those kinds of decisions?

we tried to get the president to do it last year. we have another opportunity at the end of the year to try to engage that again. we will have another opportunity later when the debt ceiling issue arrives. when are we going to make this decision? that is our question. this whole discussion -- admittedly, the president has some advantage with one messenger. you would think the discussion is nothing other than raising the top 2% tax rates. that has nothing to do with solving the problem. i have been waiting for the president to become serious about solving the problem. i do not know when he will become serious. it sounds to me like we are running out of time. we will take our cues from the speaker.

if they are able to reach some kind of agreement. >> [inaudible] >> i think i can speak for every single republican that we think every quest to raise the debt ceiling -- request to raise the debt ceiling in the future should involve a discussion with whoever the president is about what we might do about the debt. we should not treat it like a motherhood revolution. we should not airdrop it into obamacare with nov vote. the decision to raise the debt ceiling is a perfect time to have a discussion about the debt. we will have that discussion later at whatever point administration decides they

need to have that, i do not think there'll be any sentiment whatsoever without congressional involvement to raise as much money from the chinese as he chooses to races? to raise? regardless if a majority are for a, that will not happen. we are going to insist that we have another discussion about the future of our country. i will take one more. >> the majority leader wants [inaudible] are you supportive of that idea? >> we will take a look at that

when it is presented. thank you. >> the leaders also weighed in on the talks today. harry reid said that efforts were slow to a deal. it'll be too difficult to reach a deal before christmas. >> i'm sorry. start over again. speaker boehner says he is

waiting on president obama to outline spending cuts. this is kind of a strange thing for the speaker to say. president obama outlined specific cuts in his proposal to the republicans. republicans have not offered anything specific in cuts whatsoever. and nothing specific in revenue whatsoever. all generalizations. republicans want more spending cuts. tell us what you want, we say to them. we cannot read their minds. we will not make a proposal for them. they know that we are willing to make tough choices on these issues. i hope they understand by now that we will look out for the middle class first. illinois standing in the way of an agreement is republicans. -- the only thing standing in the way of an agreement is republicans.

there is a lot of bluster coming from the republicans about society kremlin quickly. every day -- crumbling quickly. they are calling on the speaker to let tax rates rise. yesterday it was coburn. today was another. he said he would take raising rates are the top 2 bracket -- and went on with other things he wanted. he wants the rates to go up on the top 2 brackets. i am confident that agreement can be reached. >> [inaudible] some republicans are saying that this is restricting. that is part of the reason that

they are threatening to filibuster. why have you chosen to pursue this? >> i will give you an example. we have to spend eight to 10 days. we need to get on a bill. they virtually opposed every time we tried to get on a bill. that wastes 10 days. we could have been on a bill and an amendment. we do not have time to do that when you do that hundreds of times each time. there are scores of times we have done it. hundreds of times in the last six years. they are crying wolf. >> other than the big fiscal cliff, what else do you need to

get done before leaving question mark -- leaving? >> we need to do the supplemental funds. intelligence gathering apparatus. we have to do something on spending. i hope the republicans moved to we can get that done. we'll have to work on this community banking now. that covers most everything. i missed a thing or two, is the general idea. christmas is two weeks from today. >> [inaudible] >> i'm sorry. what? >> [inaudible]

>> everyone, listen to this. we suddenly have republican votes on internet poker. two weeks before christmas. what the hell would they put it on? i hope that wasn't too vulgar. >> can you describe any specifics in regards to the fiscal cliff? >> we can do things very quickly, but this is not something we can do easily. until we hear something from republicans, there is nothing to draft. we can get things done quickly. i think it will be extremely difficult to get it done. there are things we have to do before the end of the year. we will continue to get those done. i mentioned some of those now.

we can get it done. this has been a big stall by the republicans. house republicans -- and icing republicans republicans in the senate are working with them. we have heard about all of the in fighting going on with the house leadership. i do not know how valid it is. i got a message that there is a ballot -- battle going on between mccarthy and ryan and the majority leader in the house. thanks. and boehner. boehner is having trouble finding help from his leadership as to what to do. the american people are suffering. sorry, claire

mccaskill said. leader has to make a decision on whether to say the speakership. >> how about the president's fiscal cliff plan, the white house plan? is he planning on putting it up for adoption question mark -- adoption? >> i'm sorry? >> will be put up for a vote? the white house's plan? >> i have no idea what you are talking about. >> the debt limit and -- >> what else? >>1.6 trillion was the total. >> leader mcconnell offered to

the floor at the senate -- will you be doing that? >> they have to be careful -- i have to be careful. >> [inaudible] >> our coverage of the fiscal negotiations will continue in a minute. over the past few months, you can buy fiscal cliff talks by going to c-span.org and clicking on the link. -- you can read more about the fiscal cliff talks by going to c-span.org and clicking on the link. we will year from representative john larson on the fiscal cliff negotiations. after that, we will hear from stephen ohlemacher.

you can see "washington journal" everyday life at 7 p.m. -- 7 a.m. eastern here on c-span. coming up next on c-span, the in going an upcoming german discusses what they want to see and a and budget deal. then david walker and rudy penner discuss the fiscal cliff negotiations. later, a discussion on the potential impacts of the negotiations and state budgets. >> the white house was very controversial, as most americans were. they designed washington city. there was competition. he designed a design for a

palace. it was not particularly awe- inspiring. in fact, a european diplomat told congress it was neither large or awe-inspiring. but the answer the congressman gave was the building serves its purpose. it is larger and more elegant. photo mer new york times bodh critic on the white house. watch it on sunday on c-span three on "american history tv per." >> congressman steve scalise and jim jordan.

>> thank you for coming. to delighted to welcome you a presentation by the outgoing and incoming chairman of the republican study committee of the u.s. congress. we are privileged to host this event and welcomed the incoming chairman and to think the outgoing chairman for their service. this is a special friendship between aei and the republican committee. we have cultivated something that is very rewarding for us. it is unusual to have an event like this regarding the ingoing and outgoing leaders for any organization. the nature of these leaders makes it more likely than what we would see with -- them with other organizations during the republican study committee is not the majority in congress, but there is a majority of the majority.

they are the majority of republicans in control of congress. many of you i guess hopeful be in power for many years. i will read this to you because i think it speaks volumes about what these gentlemen are trying to achieve. the republican study committee was created where members can stand on the basis of principle and where minorities of men and women are former leadership positions can affect change. they can do it on the first day in congress. they can do it by coming up with sound policy ideas and articulating a powerful position in the debate. it is the friendship that we have cultivated for years,, especially with paul. he was an aei intern many years ago. jim jordan is here on the right. his temper chairman and at the

end of this congress, in a few weeks. -- his term for chairman ends at the end of this congress, in a few weeks. he has quickly become very influential as a republican member standing up for absolute principles of limited government that is constitutionally limited, fighting against tax hikes, and allowing families to keep more of what they earn. simple principles, but then suppose nonetheless. the incoming chairman represents louisiana first congressional district. he was elected in 2008. he is known as a staunch conservative. he advocates for the principles of limited government, american greatness, the idea of limited

government, and traditional family values. he is a vocal member of that house and energy congress committee. he has established himself as a go to guy for articulating conservative views. i'm delighted to have both of them here. congratulations, jim. [applause] we have a few minutes to ask a you questions and get some thought from jim and steve on how they see the issues ahead of us today and what we have seen over the past couple of years. maybe i can start with jim. we have gotten to know each other and i have enjoyed that. have seen a lot of stuff going on here at aei. i'm sure you have the scars to show for it. over the past two years, what

are the biggest things you have learned? >> let me first thank you for having us and the great work you and your organization do. your last two books have been tremendous. many members have enjoyed the info and the thoughts in there. thank you for that. i have used the second book and read part of that in a presentation i gave in church. i read that from the pulpit in the church. >> no souls were saved that sunday. [laughter] >> we appreciate the relationship we have with your final organization. when i republican conference was most united was probably in the summer -of 2011 when we have the debt ceiling debate. as you may remember, we were the

entity that put forward this concept that reviewed as a solution and not just another deal, but a solution to our spending, debt, and growth concerns we have in our economy. we call that and balance. -- cap and balance. it was something the american people embrace. unfortunately it was something that was tabled. it got at the idea that we need cap spending and cut spending. we argued that it would help address our fiscal concerns, but most importantly would help us get to have economic growth. the one thing that we need -- there was a great line.

when you have 1% growth, it feels like a zero xumsum game. when you have 5% growth, that is down the opportunity. what can we do to give opportunity to american families, young people, to americans in general? we need to get back to the policies that will give us economic growth and optimism and special thing that reagan talked about. that is where we need to be as conservatives. >> if you have a particular disappointment besides the november election, what would it be? >> the fact that we do not pass that. let's be honest. the decisions made in the summer of 2011 -- it be good have held strong and got something done, some solution to promote

economic growth, we would not be where we are today. they divided. we are getting ready to raise the debt ceiling again. you have yet to make one dime of the promised cuts during the last agreement. that is probably our biggest disappointment. it we have had a better outcome and that right, in that debate, it might have been -- it might have had an impact on this past election. it is likely tell our kids all the time -- decisions have consequences in the future. that would probably be my biggest disappointment. we told the voters what we were going to do. that same situation where we did not get it done is my biggest regret as well. >> steve, your take on an organization that has gone from

something like 17 members to 170 members. an extraordinary expansion because of good leadership and also -- what are your plans? what will be see? what are your big purity's? -- what will be see question mark -- see? what are your big priorities? >> the principles that we believe in, the more we talk about them especially on those kinds of terms, we have a much better ability to bring people to our side. iany to lay it out in a much better way -- we need to lay it out in a much better way. we have got the scars to prove that he has been a great chairman. i want to congratulate him on the job he has given and service to all of us.

if you look at where we are and where we will go in the next congress, we have great challenges ahead. we know what we are facing in terms of what this president wants to do not only in terms of spending, but radical policy and terms of the basic principles that we believe in that secure the american dream. if you look at how we can achieve this as conservatives, we first need to recognize that barack obama has talked a lot about a mandate that he had. he did not -- he ran on a very broad agenda in this last election cycle. things are bad, but it would be worse under romney. do not blame me. that guy is bad. we need to continue because things are about to get better. that was the bulk of his message. in the house, we ran on a conservative agenda.

we took the hits for the votes that we got. we passed a budget out of the house. we passed a budget that starts to tackle entitlements that you that we will go bankrupt if we just sit back and do nothing. we brought up and balance and pass that in the house. we put real cuts on the table. jobs bills that had a partisan vote. -- a bipartisan vote. all of those bills, we were called all sorts of things. we explain to the people of this country what we would do to get this economy moving again and to control spending in washington. we were reelected. we were be elected with a mandate to not only be in charge of the house, but to be that

only line of defense against a radical administration. we know what our task is. look at our strength. it has never been stronger in numbers and in resolve. we will be tested. there are many members that are coming back that have been through this fight. they have been attacked for things we have fought for in the last congress, but also the candidates that got elected. they have expressed interest in joining roc. they got elected speaking about these conservative and suppose that we believe in and defending the freedoms we know that are at risk. i feel confident about where we are position right now, but i know it will be a tough road. we would not be doing this job if it was easy. we look forward to the challenge that the people sent us to go do. >> something that is on all of our minds is the fiscal cliff. i have to ask you to both weigh

in on it. number one, what is going on that we understand? number two, what should happen? number three, what will the roc do to help us get to that better state? anyone want to answer that one? >> worst of all, look at where we are. -- first of all, look at where we are. i did not vote for the budget control act. it did not just the real problem, which is spending. look at the debate. it is most the a debate about how much taxes to raise. he keeps adding as soon as a number is thrown out there. he keeps adding to it. he has an insatiable appetite. we're not talking about addressing the real problem. i do not think taxes should go up. look at what he said three years

ago. if you raise taxes in a bad economy, it will make things worse. we are still in a bad economy. why would you want to do something that will make things worse? focus on economic growth. bring out those jobs bills that we fought for. many of them had bipartisan votes. that was a big issue that came out of this election. obama was not talking about jobs or how to control spending. all he wants is an unlimited debt ceiling increase in he can continue going forward. you will see us continue to fight for those principles. we know that is what will eventually help solve these problems. >> look, what we need -- i guess -- roc but something forward that when to 2 rates.

-- 2% rates. we should have raised taxes -- we need a plan that inspires. everyone understands that the tax code is broken. how many of you inc. said the tax code is broken? every hand goes up. think about it. any tax code that says half the population, you do not have to participate in the vein tax, is broken. any tax code that says to american companies we will charge you the highest corporate rate in the world is stupid. it is broken and stupid. you might want to start over. here is what we are for, here is what helps your family. here is how it makes a difference for you personally.

this is why it would give more opportunity for your children coming out of college. it has to connect personally with families across this country. i think that is very important. we have got the right principles. we just need to present them better the rate that arthur writes and talks about. i never intended to get into politics. i was going to coach wrestling forever and then he said on get married and have kids and you're sick of government taking your money and telling you what to do. i want to run for office because i care about our family and other families having opportunities. that is the message we have going forward. that is why steve understands this and why he will be a great chairman and why he's doing such great work. >> thank you for that.

steve, you mentioned something about the debt ceiling. that is an important topic for many americans. the president of the united states has proposed as many of you know to be able to raise the debt ceiling or the united states in an unlimited way forever without the approval of congress. so what? what is the big deal? >> that is the most frightening proposal and there have been a lot of frightening proposals. if you look at where we are in terms of our national debt, when you add on the entitlements that are not funded, i do not think the president has a knowledge to our maybe does not recognize that one of the greatest threats to economic freedom and to the american dream for my children and my kids children, most people that have young kids

recognize the ability for our children to have the same opportunity that we enjoy today is at risk because of spending. it is the biggest threat, but the president wants to continue spending and will not put cuts on the table. he comes out with this ludicrous or postal to have unlimited increases of the debt ceiling city can continue spending as much as he wants to and rack up debt to historic levels -- he comes out with this ludicrous the postal to have unlimited increases of the debt ceiling so he can continue spending as much as he wants to and rack up the debt to historic levels. >> economist at look that 21 countries over the past 35 years who are precisely in the same situation as the united states. we find that countries who try to solve fiscal crises on the basis of revenue increases through taxes tend to fail. those that succeed relied on at

least 85% on average on spending cuts. this bolsters argument that both of you have. this is the empirical proof that this is the right approach. when you see what appears to be an endorsement of the president 's policies has ratified the last election. here is a philosophical question for both of you. around here, we have said for a long time that this is fundamentally a country fundamet is center-right. basically a conservative nation. certainly your districts are. the main reason he ran is because he wanted your values to be represented. what does it say about the american zeitgeist that this election went the way it did, particularly because we were talking about how to solve our fiscal problems, whether or our problems for underscore -- overspending or under taxing?

>> before i get to that, let me add one other thing. the constitution. we are the body that is supposed to do with spending issues and somehow the president wants to forget about that. it makes no sense to me. kevin's work is greawt stuff. -- great stuff. remember, elections are still about candidates. i did not you can extrapolate there is a -- there are two running for office. the incumbent wona nd our guy loss -- won and our guy lost. there are a host of concerns. many of you have data about what and why -- what happened and why

it happened. we have to make sure we are presenting what we think is best for the country in a way that connects with american families. when we do that, we will and. our party historically is about four key issues -- lower taxes, less spending, strong national defense, and defending traditional american values. we have a candidate who can present that in a can -- inarticulate a compelling way, we win. but we have members of congress who could present those things in the same way, we win. i do not think anything has changed. it is always msnbc giving advice about how we have to it behave. when we stick with our principles and present them correctly and appropriately with the right tone, passion, and way -- we win. i think we are at one of those

important moments where we have to recognize what we believe in is right. the principle is truth. we have to be willing to make the case and do the extra work and make sure we can prevail and win. >> one thing the president did throughout the course of this entire campaign, it was a populist and devices campaign but it shows you that it populism and division go unchecked, there are people that will buy into that argument if they are not shown the other side of it. not a good enough job was done at not only defending free markets and conservative beliefs, but getting into this question of tax fairness and the concept of sticking it to the other guy on the other guy is behind the tree. as long as the guy making it more the me is taxed higher. instead not being in shape -- ashamed of wealth.

anybody can achieve that. look at the people that got out of harvard and then there billionaires' today. because of this great system of ours. do not forget about the millions of great jobs they created along the way. it was not just about the wealth. to go deeper into the question of president obama's attempts to raise taxes -- some people will look at and say maybe somebody can afford to pay more. the first question is, if you give this president more money to spend, do you think he will use that money to reduce the deficit or spend more money? most people recognize he will probably wasted on more and efficient government and the wall hard jobs. it will hurt those middle-class families that are not getting their jobs right now because the president -- obamacare has over 20 tax increases on middle class

families. rex the fairness point is interesting. most of us who descended from immigrants would be hard pressed to imagine our ancestors coming to this country to get a fairer system of forced income redistribution. i appreciate the point. i think the redefinition of the fairness argument is probably a key thing you've talked about and we all need to contemplate and express better. one of the things that keeps us awake at night here regarding the fiscal cliff is what will happen in the defense sequestered. if this thing rolls over and suddenly there are automatic budget cuts, there will be relatively indiscriminate cutting across the defense budget. this is something that is a dangerous thing for this country. can you weigh in on that? >> we passed a bill that shifts

those defense sequestration cut over to non-defense discretionary. energy at the commerce was one of the areas. we identify those things. some of them are things people recognize we should not be doing, we cannot afford to do. but we ladles cut out there. it was a bill i still stand behind. we need to have in sequestration to cut spending. i'd like to see us shift away from the defense cuts and other parts of the not discretionary budget. >> i feel the same way. the only thing worse than defense cuts are no cut at all. i do think it is important we remember strong national defense is what our party is about.

many of you probably remember condoleezza rice's speech at the rnc. i think she captured what is at stake here. the world is a dangerous place but it is less scary when america leads. you want to lead militarily, you better lead economically and vice versa. she capped what is at stake for our country. america needs to lead. wish to replace those cuts. we have supported that legislation. a member of the rnc has put together two bills -- one, i extend all tax rates. had that 19 democrats -- it had 19 democrats supporting. then the defense cuts to replace

the defense cut. we have that bill ready. >> i am going to give the rest of my time to the audience. here are the basic ground rules -- if you have your hand up, we will id with a microphone. when you get a microphone, say to you are an organization. and to your protest statement in the form of a question. [laughter] we will start right here in the fork -- 5. >> and david grant. christian times monitor. one thing that has been discussed is immigration. i am wondering what you think about how the conversation has gone so far with in your party and whether there is something you could support that involves some sort of legalization process for people already here

legally, which seems to be the main sticking point. >> we have some great members of rc that are interested in being involved into this debate. i think you will see that debate escalates in the next congress. i will mention role -- raoul labrador and -- this is what he did before he came to congress. the fact that you have strong conservative voices helping lead this debate is critical to solving instead of using it as a political wedge. >> he stood with their principles, you will arrive at the right policy. that is what we need to do. we need to remember that for people who legally come here, we want to welcome people.

it faster, better process so more americans to come here and experience what our families experience have that opportunity. if you have never had a chance to go to -- and naturalization ceremony, they are an amazing thing. when the new citizens say the oath and they realize they are now citizens of the greatest country ever, the smile on their face, they all want to get a picture with me and i had nothing to do with it. it is a special moment. i have done for of these. we want to make this is the mark -- this system work a lot better and quicker for those folks. and congressman labrador will really help us to in this debate. i think we will get the positive done. >> your hand was up next.

>> build johnson. free-lance writer. i agree the individual part of the tax code is probably stupid and the corporate part is broken or the other way around, i worry about the center part. the small business people. especially as we talk about revising the corporate tax rate, bringing that down to 25%. if we still have individuals paying their small business taxes at 35%, that is a killer. do we need to create a new tax bracket for small businesses at maybe 10%? >> potentially, but what we certainly need is a sampler, there are system. my not -- why not, a two rate system. it is at ten% to a certain level, then at 12% and that is the end of the game. you probably have to keep the

mortgage interest deduction, the charitable -- but something bold like that, here we are . bolten simple. -- bold and simple. >> i am a tea party activist. i will like to know why the republicans specifically mitt romney and his campaign, nobody would listen. they would not listen to henry olson aei. he had words of wisdom. i contacted the romney campaign for several years raising funds. it would not listen it is very frustrating that regular people who do not belong to fenty

campaign who does have regular iqs, nothing to touch your is -- >> you might be surprised. >> with all due respect, we know how to communicate and the republicans have to get cooler. i hate to say that but in a country where the number one show is "two and a half man," we have to communicate better. i would also like to say if he did not mind, what happens to men when they get on capitol hill? those men who were soldiers, could they loosen the tight? this is more. we have a dysfunctional, very dishonest president. please fight back. thank you.

>> we have jim jordan, former all-american wrestler here. how we buy back? >> i have said a couple of times. present the principle that we know work. you do it with a smile. i've always loved the line i am a conservative and i am not mad about it. you do a persistent, courageously. but with a smile because when you have the truth, why not be happy about it? that is straight from scripture. >> we can improve communication. every campaign is different, which is why you might have a congressional seat with the republican is a staunch conservative and yet mitt romney might have lost. communication is critically important.

how we talk about the conservative things believe in and how it helps improve family lives. going into those nontraditional places. we have colleagues that go into telemundo and univision. not everybody does remini to do more of that request is a lot of work. we have expanded asei for that reason -- aei for that reason. all the way in the back corner. >> rick from fairfax. the main thing the republicans were remiss on their communications with the charge that wealthy people, the income over 200 is somehow taxed at a lower rate. according to the cbo, that is not true. i've said this myself on c-span3 i was feeling american crossroads.

if you do not respond, obviously petipa% will leave is to prevent -- obviously 55% will believe it's true. if on average the right rises as income goes up, that means somebody about 200 is compensating for that. my question is, for the upcoming debt negotiations, can tjhhe republican conference insist on at least to wanted to billion dollars of savings hist-- $250 billion of savings for 2014? >> we should insist on some downpayment on some does go

sanity in the congress. i think back to th first question, cut , cap and balance. that is what we laid out in that plant. laying out the down payments. the old game is give us your tax money now, we promised in the future we will cut spending. we really promise. and it never happens. so it is always raise taxes now, we promised to cut spending in the future. the cartoon last week was the one -- lucy and charlie brown. we did the same thing in the last debt ceiling agreement. i agree we should. that is something we will be pushing to do. in the context of this debate and of what i hope will be a debt ceiling the date that takes

place february and march next year. >> let me follow up on that question. it is one thing to stand up to the president on this problem will look at the data, we know that government spending as a percentage of gdp has risen under republican majorities more than under democratic majorities. how can we deal with that little better? >> one is to provide a vision for where we have to go. we have done this the last three years. we put on an alternative budget. putting on a budget that shows a path to balance. we think that helps make the budget that -- that makes it better. we show that. i think that's part of the

vision. how this will help your family, your community if we get the balance. but that means for opportunity for growth. >> i came here in 2008. one of the things that frustrates me when i ran for congress, i was a state legislature. you saw during a republican administration with the republican house in the senate, spending going dramatically. when the republicans were fired in 2006 for spending too much money, the deficit was around $140 billion trade today is over $1 trillion. the bigger issues plummeted to the next that, i think that will be the one big leverage piece to go for the big solution to this. you have to reform the big three entitlements starting with medicare. we put that on the table in the paul ryan budget and in the rsc

and budget in a more aggressive way. for seniors 55 or older, nothing will change for you accepted the tobacco bankrupt. for people younger, and will have to be reformed to read by the way, you will never balance the federal budget into you make major entitlement reforms. that has the part of this discussion in the next debt still in negotiation. the debt ceiling is a symptom of the problem terry the president will make it out to be the only problem and anyone who does that give him the money is irresponsible. what is irresponsible is not addressing the root of the problem -- we are spending too much money. >> a question all three of you. it would be interesting to see what, if he may have -- to see

what comments you may have. >> the heritage foundation is a pioneering group. they have done a super important work that has some flaws all of us. i am a donor to heritage and a proud one. these guys have been a lot of stuff over there as well this is the kind of move that can keep them in the line of sight for american conservatives. the are a conservative movement think tank. it is a smart move. .here's a lot of speculation you never know how a leader will lead. i came to aei four years ago. i came from syracuse university.

i was a professor of business and government. the road to irrelevancy. some boring guy from syracuse. then told us later, i read in the washington post about a right wing maniac. it is the same bacteria you do not know how anyone will lead. i'm looking forward to -- i think good times are on the horizon with those guys. >> we will miss his voice in the senate. there has been a long relationship between heritage and the committee. that relationship will continue. >> it is a tremendous organization. they have been linked for years.

his ihat is where ed got start. senator demint, we will miss him in the senate. he is an honorable, wonderful guy. i will tell the arthur says he has to write a check to aei now. >> you talked about providing a vision for the future for conservatives. a paper it took a brave -- on

intellectual property. he has been fired. the thing that was a wise decision for a party to reach younger voters? that was a wise decision for a party to reach younger voters? >> if you look at where the rsc will go, it will be the members that have to unite and fight for those principles we believe in. and do it in a unified way. the next two years will be a challenge. we will be islamic upstream with a lot coming at us. we know that. we are looking forward to that tennis -- challenge. at the end of the day, it is only when the membership -- if

we can unite together as members of congress to shape that vision in a conservative way, then we will be successful. my main focus will be uniting our members to know what our task is. >> i was struck by your principles. one principle i've not yet heard is the idea that washington politicians cannot solve these problems alone and conservatives should think about strategies for an powering states. one idea have talked about is

the idea of a house rule that would recognize the 10th amendment authority of states to limit the scope of an article 5 convention they threaten. what kinds of discussions are you having now about empowering states? >> bobby jindal, the incoming had the the republican governors association, we have already had this conversation to . with the next two years, i want to work closely with the governors. just like we proposed conservative solutions in the house, those governors have a great incubation ideas about how to successfully tackle problems. they have already done it. we have the number of things bobby has done to reform our

state. you have great experiments like that in so many states. we can invoke those ideas birkenhead in hand. -- hand in hand. those governors have to balance their budgets and they are doing it while not only taking care of the need to their state but in many cases, out -- acceding economic growth. lower unemployment numbers in many of those states led by republican governors. we are going to be working with them. >> let's go back here. >> i am from politico. there has been a lot of us because [inaudible]

not because we do because they're too conservative. -- because they are too conservative. >> i think it is wrong. it is not healthy. i think it is largely because these guys have voted against some of the big issues that -- the debt ceiling, they voted conservative. it is unfortunate that took place. hopefully there is a way to help fix it. camp from can this represents 70% of the state. the member from that district has been on the ag committee for

a long, long time. and it kicked off the committee andy has a ph.d. in ag policy. makes no sense to me. hopefully it will not happen again. >> i think it is very unfortunate members were removed from their committees. one of the things -- i have talked for years, not just to this campaign for rsc chairman. to get more rsc members on the steering committee. talk about that as part of a campaign, to formulate a larger block of members on the steering committee. we will work on that in this

next two-year term. >> national journal. you have made clear that you do not think tax cuts would be effective for the solution to this problem request tax increases. rex tax increases, and excuse me. -- >> tax increases, excuse me. >> you have to step back. what is going to help our economy? washington has a big spending problem. had it into our fifth year of $1 trillion deficit. we have heard a thousand times -- these are politicians making these promises. we promise, give us more money

and people use it to reduce the deficit and debt. never happened. it is a joke to go down this road. i know we are in a tough situation because of the decisions made in the past 0.2 on january 1, taxes go up. -- in the past. point to in january 1, taxes go up. it is bad policy. it will not create jobs. you cannot trust politicians. particularly the fact that the congress. you cannot go there. -- particularly the guys in congress. you cannot go there. >> we have found a number of areas where controlling spending -- the president likes talking about he and bill clinton and

the clinton tax increases is what balance the budget. it did not balance the budget. it was not until later that republican congress comes in and finally controls spending that we got to a balanced budget with economic growth. if you look in the 1960's, 19 80's and the 2003 tax cuts, the federal government took in a tremendous increases in revenue. you want new revenue? under those 2003 tax cuts, within three years, the federal treasury took in 40% more money. this muth -- tax cuts actually generate the revenue to give you a balanced budget. should we focus on fixing the problem or appeasing the president pound of flesh he wants to get out of the class

warfare he played during the campaign? rex to the tax rate increases -- >> so the tax rate increases are more philosophical and economic at a principle? rex it goes to his class warfare message more than anything. he himself in 2009 said this is bad for economics. if you increase taxes and a bad economy, it will make their economy worse. the president made that case and we are still in a bad economy. >> i have to call the last question. to janet here in the front. >> would speaker boehner be able to pass a compromise on the tax rate increase without the rsc? >> um -- i don't know.

[laughter] if it has a tax increase in it, i will not be for it. i think there are lots of members who will not be for it. but you do not know. the rsc is not -- does not always function as a unit. you see it first hand when you are the chair. we will see. but we have said it several different ways -- should not be raising taxes. >> i would not support a plan that raises taxes. i'm focused on working on a solution to this problem. it is a serious problem to rid the president has not without a serious proposal -- it is a serious problem. the president has not put out a serious proposal. the only thing the president has talked about has been very partisan. he campaigned on a promise he

would work in a bipartisan way. we are calling the president to fulfill his promise. there is a good place to start with some of the ideas we have already put out there that will focus on economic growth rather than higher taxes. >> this brings us to the end of our time. thank you for service. god bless you both for service -- for your service to our country. >> david walker and former ceo director rudy penner discussed this with negotiations. then the potential impact of the fiscal cliff of state budget. lullaby an update on the talks. -- followed by an update on the talks. >> live from capitol hill, starting at 10:00 a.m. eastern

on c-span3. also, federal reserve chairman ben bernanke holding news conference. and that it on the federal open market committee meeting. live coverage starts at 2:15 p.m. eastern also on c-span3. >> the white house was very controversial, as most things in america were. washington city, there was competition. he submitted the design for a palace. americans were not having a palace. it was not particularly of inspiring. in 1821, a european diplomat told congress it was the large, nor all conspiring -- nor awe inspiring. but the building circuits purpose. if a larger, perhaps some president would be inclined to become its permanent resident.

but the kohlberg has gathered a few efforts davis white house photos -- >> vicky has gathered a few of her favorite white house photos. >> from the u.s. chamber of commerce, and look at the fiscal challenges facing the nation. including negotiations over the so-called fiscal cliff. former comptroller general david walker and former congressional budget office director rudy penner explained why they think raising taxes will not solve all the problems. this is just over an hour. >> i will make a few introductory remarks. today we are going to talk about three issues briefly. one is that fiscal cliff, to is the debt ceiling. three is the so-called big deal that has to be done on our debt

and deficit. of fortunately those issues, convoluted, especially in this town. they are distinct. the impact each other but they are distinct. this fiscal cliff is an artificial state. congress came in, said this law expires on this date. they extended it wants. they put in the sequestration. it is a date. all they have to do is extend the date and allow themselves time to discuss the issues. instead they are putting it all into a lame duck session. that is a problem. sometimes it leads to bad policy. the fiscal cliff can have real consequences. cbo has said that it would cause a recession if we were to go off the fiscal cliff.

i do not dispute that i do point out that in 1993 when these taxes were first put in, many said they will cause a recession. they did not. the economy is improving on its own right now. and getting some much stronger. the impact of the fiscal cliff, while not something to be encouraged, may not be as bad as many have thought. and certainly is not worth making bad policy that will have much longer-range implications. the debt ceiling. the second issue. another kind of artificial date. it has been in law for decades. congress periodically has a partisan debate over whether to extend it. an interesting debate since there really is no option. you either to extend it or you

default. the fault should not be an option. it is something that should be avoided at all costs. but we put this critical data bank -- date in there so we can have the debate, have a vote and then extend the debt ceiling as we know we have to. finally we have the issue of the debt and deficit in the long run. the issues of real importance. we do not account for our expenditures the way businesses do, the way individuals have to. degette to account for them and ignore many of the long-term implications. if we were to put them in, it would increase the amount of the debt we owe and have promised, dramatically. also on the big deal -- we know there has to be taxes, revenues, and expenditures.

the all have to be on the table. we cannot do it with anyone of them. we need to have a comprehensive approach that includes all of these. doing that takes time. what we do in the short run on the fiscal cliff may impact our ability to achieve the greater goal and get some real fundamental improvement in our debt and deficit situation. tax increases that occur now will probably not be debated again in the context of comprehensive tax reform. it will make it harder to do that and to achieve that. as we go to these three problems, we have to recognize that it is a very short one problem with the artificial deadline. something we have debated many times in the past and probably should be fundamentally changed. if we are going to raise the debt ceiling to talk about it,

we should do it prospectively at the death the but the process. but we have not had but it for quite a while. finally, the big issue is how much can we spend and how much do we have to tax going forward over the next two decades to keep our fiscal accounts in balance and move them in the right direction so we do not become priests? it is interesting that we talk -- we do not become greece? it is interesting that we talked about the fiscal coordination have in the countries and to last come along and bail them out when they have not done what they're supposed to do? i do not know that we are that much different. we have a great panel. people thought are far smarter than i am. i will introduce them now. and then i will sit down and i

did ask some questions to revival at the panel to keep their answers relatively short so we can run through a lot of questions and get out of here on time. we havealison -- we have ailson frasier, director of the institute for economic studies at the heritage foundation. as director, she oversees the heritage foundation research on a wide range of domestic, economic issues, including federal spending, taxes, the debt and deficit. before joining heritage in 2003, she was deputy director of the oklahoma office of state finance where she worked for governor. next, rudy penner, the institute fellow and the rj and francis

miller chair in public policy at the urban institute. prior to that in his long career, he was director of the congressional budget office where he supervised a young economist who did not learn a whole lot from them and that is what i am here rudy has had a distinguished career he has had. i remember those conversations. i hope i can do them-just -- i can do them justice. finally, we have david walker, founder and ceo of the comeback america initiative. he is formally the comptroller general of the united states. he was also the head director of the u.s. government accountability office for almost 10 years. he is widely read and has

written numerous articles on the debt and deficit. he has a new initiative which makes tremendous sense. his new group is looking at the efficiencies, inefficiencies, duplications in the government to try to find areas where we can save money without cutting. it is a very interesting initiative, one that you ought to look into and see about supporting. i hope we he will mention it briefly in his comments today. i will turn to the panel and sit-down and we will start discussing hopefully some of these issues. [inaudible]

>> the short run problems of the fiscal cliff, but we're going to do with this debt and deficit issue and take time to summarize how we should look at these issues. i will start with david on the far side and move right across. >> thank you for coming. first, there are common denominators between the challenges at the federal, state, and local levels. some are inadequate but the controls, escalating health care costs, huge unfunded and off balance sheet obligations and outdated tax systems. other factors -- demographics, and infrastructure, state of the infrastructure, etc. with regard to the federal government, there is a lot of attention on the so-called fiscal cliff.

i think here everyone knows what that relates to. that is really more the system. it is not the disease. but washington typically does, it focuses on some things rather than the disease. we need to avoid the fiscal cliff. we need to recognize reality. there is only so much that can be done the balance of this year. we need to do a credible down payment and build a bridge to a grand bargain which would involve a more fundamental reforms that have to be achieved. but it controls. we had but the controls until 2002. we had been out of control ever since. we have had democratic spending policies of republican tax policies which leads to large and growing deficits and escalating debt. we are going to have to reform the social insurance programs. we have to reduce defense

programs and other spending and the gate in a comprehensive tax reform. that takes time. it will have to of all -- involve the extraordinarily presidential leadership which we have not had in a while. hopefully we will get that. it will involve some typhus citizens -- some type oc citizen -- type of citizen engagement. the good news is i recently took a 27 state national fiscal responsibility boss toure are round the country focusing on swing states. a representative group of voters did the following after they heard the burning platform case about where we are -- 97% believe putting our finances in order to be a top priority. 92 percent agreed on six

fundamental principles and values be exposed to them for guiding a grand bargain. 85% agreed it would take a combination of spending reductions and additional revenues. and least 77 percent agreed on a range of fundamental reforms to but the controls, social and service programs, health care, defense, taxes, business and political reforms that are needed to put us on a more prudent sustainable path. people are disgusted with a lack of progress. they want results, not rhetoric. i am in town for private meetings on the hill and the white house. hopefully seniti will prevail -- sanity will prevail and build a bridge to something that is transformative. in the final analysis, we are all in the same vote and share

in the commonalities. we need to work together to solve his problems to create a better teacher. >> i have no idea what is going to happen with the fiscal cliff. i have an uneasy feeling that president obama and speaker boehner do not know either. it is a huge possible fiscal shock. it would be one of the biggest negative fiscal shocks we have had since world war ii. the only thing that is comparable is when we had in vietnam surtax applied after military spending was already falling. falling office cliff would mean a recession. i think it could be much worse than cbo implies. 1, the economy is very fragile right now and vulnerable to a

shock. secondly, i think it has a horrible psychological impact on the business community and consumers who would totally lose confidence in our government's ability to govern. i agree with david that what we need right now is a downpayment, making some progress. one that probably involves the tax and spending side. and the pledge to do much more later. the important thing to know about the proposals on the street right now is that you can accept everything in the president's proposal for everything in speaker boehner's proposal and he would not solve the budget problems in the longer run. in my judgment, you need about twice what they have put on the table.

i'm very troubled by the fact that we are giving the impression that we can solve this problem without imposing much pain on the middle-class. the president made that very explicit. he promised never to raise taxes on the middle class. of course the republicans would back him up on that. there is no way mathematically you can solve this problem without giving something. that has to involve the middle- class. that is where all the money is. as for the point about building a bridge to the bigger solution, i think we have to. i am not clear how we do that. how do we pressure the congress to returning to the issue and avoid the cliff right away? that is very hard, i think. we have had these mega triggers

of this sequestered. we thought surely the super committee would avoid this totally irrational thing. because they would avoid it and come up with something more reasonable, but of course they did not. that is what is that -- what has left us where we are today. it did trigger did not work, what would work? i've become pessimistic that we can think of any action forcing mechanism. >> thank you. alassane? >> thank you. i am delighted to be here. i want to talk about some basic things. the discussion we're having today is not about that this booklet at all. the fiscal cliff is more than -- is not about the fiscal cliff at all.

this fiscal cliff is about other things. there are a number of things that need be addressed. this discussion really is not about the fiscal cliff, per cent. congress and the president can come together quickly and pass a bill that would put off the fiscal cliff, he there for some large amount of time or even indefinitely. it really is about making a down payment on closing deficits in the future. i would say it is also really about the president's campaign not this -- not just this past election but his first election to hike taxes on the successful. we have to see some real leadership on the longer-term budget unsustainable issues.

what we do not need is negotiating in the political theater. when we see that stop, that we know we will be serious about whether we will resolve the fiscal class -- cliff and have some large down payment. when it comes to republicans and conservatives, there are three things to bearer in mind. one is the house republicans they were elected to cut spending and not raise taxes. that is one of the reasons it is hard to move toward. there are a number of revenues that would be acceptable to conservatives. the first one is one that speaker boehner put out almost immediately after the election. that is revenues to a stronger economy. that seems to be a table -- to

be acceptable. also acceptable would be a way to reduce subsidies. you could see more premiums for things like flood insurance, pension plans and so forth. these are acceptable type of revenues to conservatives that are not getting a lot of discussions. also are forms of privatizing. we talked about public-private partnerships in transportation, and for structure. also all kinds of ways we can undertake a program of privatizing, involving asset sales and other services to generate revenues to the federal government that would be absolutely acceptable to conservatives. we could go without access to energy sources -- open up access to energy sources.

the new revenues must not be used for more spending and used to reduce the deficit. how we would lock that in my past experiments have been rather a failure, i do not have the solution to. it is important to note there are revenues that are acceptable to conservatives. that leads me to the other point. our long-term issue really is the spending issue. to the extent we have tax revenues low today, not because of the rates, because the economy is underperforming. the economy is quite weak right now. we should see much stronger growth and unemployment much lower. we want to see policies put in place that strengthen the economy and also begin to tackle this longer term spending issue we have driven primarily through

entitlements. when it comes to those, there are a number of very broad, bipartisan support of the recommendations easily available to the president and speaker boehner and other leaders want to come together and get serious about making a down payment on our fiscal future. that leads me to the fourth issue -- it is possible to solve this without raising taxes. i know this because at the heritage foundation, we have done this as part of the product by the petersen foundation. we put together our long-term plan. i have a right here pitts aimless -- i have it right here. shameless promotion, i know. it is a choice. maybe a political one, but not economic. even warren buffett, who is been a champion of raising taxes on the wealthy to make sure they pay their fair share, would not raise revenues over 18.5% of

gdp. so we need to think about is it necessary, if you get more revenues, how do you ensure they do not go to more spending? what are we talking about taxes right now women have a spending problem? that is what i would like to offer at. thank you, very much. it is interesting that when you look at the exigency getting something done, it really is artificial. we have a date that congress put out there. that is what we have to act by. if we do not, we go off a cliff. i'm not suggesting by any stretch that we ought to do that. i am suggesting there is hyperbole on both sides to say we have to act now. they see this as a gate that

should not be wasted. a crisis that should not be wasted. i am afraid that in rushing to judgment over an artificial date that the policies get the short shift. i am not suggesting we should go off the cliff. i do not think that is good policy. but these artificial baits have never produced good results. -- in order to create something that was so draconian it would never happen, we have to deal with it. back in the depths of the financial crisis, we put in a program that some people said would cost $700 billion. the banks have paid back, and they have done so with a profit. aig is now going to unwind its federal relationship to the tune

of a profit to the federal government. many people were very skeptical that would ever occur. putting out these artificial baits, -- dates, i think sometimes we give this policy a short -- people alluded to the fact we have to have a bridge to the future. that is a recognition we are probably not going to get a big deal in the very near future. we know the pieces, but the negotiation might take longer. is there something out there we are missing that we should or could do to ensure that whatever we side to do -- decide to do does not go to waste and does not get lost in the shuffle down the road? is there something we are missing that we should do that we could do to hold people's feet to the fire? >> we ought to talk about what

might be realistic. given the clock is ticking. you have to look at what set et to expire. i would suggest the payroll tax cuts should be allowed to expire. it is $127 billion. it is not needed. in addition to that, it sets a terrible precedent to general revenue financing of social security. secondly, you clearly do not want all of the sequester to take place. allow some of it to take place. we have got to patch amt. we have got to do something pending more fundamental health

care reforms. the president talks a lot about balance. i would suggest that is the wrong term. we need a comprehensive solution, not a balanced solution. balanced implies 50/50. it should be weighted towards spending. tax expenditures, they are back door spending. if you reduce tax expenditures, even geared toward the "wealthy," then you reduce spending and increase revenues. 95% of people who voluntarily sign up for voluntary programs for medicare get a 75% taxpayer subsidy irrespective of their

income. if you move towards premium support, that will generate more revenues, but it will count as a spending reduction under government rules because premiums bought from medicare beneficiaries count as reduction in spending. if you look at indexing formula as that end up affecting both the spending and revenue size, dealing with inflation or otherwise, you can do things that are structural that can slow spending as well as generate additional revenues. we need to do a lot more than that. what we also need to do is recognize reality. our goal should not be balancing the budget. we will not do that anytime soon. the states do not do it either. it is not a balanced budget. they are using cash flow. what we need to focus on like a laser is debt to gdp.

i think realistically, what ever you do not let expire, you extend to the end of september, along with the debt ceiling limit, so you have all things coming together at once with a more realistic mechanism, because the nuclear device did not work, the super committee was a super failure committee, and therefore we have to recognize those kinds of devices will not work. you have got to have something that is more pragmatic. >> i think the discussion over the fiscal cliff has gotten more pessimistic almost every day. we really cannot go over it. there is one thing that gives me a little hope. it seems to me there are three things we almost absolutely have

to fix. one david mentioned, the alternative minimum tax. right now, we have to fix it retroactively for 2012. if we do not do that, there will be over 25 million americans who will get a real shock when they do their task in terms -- tax returns. they may not be able to do it early. i am told they are not compact -- not prepared. they have to reprogram their computers, they have got to do all sorts of other things. the other thing is that i cannot and imagine we will allow doctors under medicare to experience the 27% cuts in their reimbursements. there will not be 50 doctors serving the medicare program. thirdly, i really think we have to fix the estate tax, which goes back

[laughter] i said that at an earlier meeting and a congressman responded, but you should commit suicide in 2012. [laughter] so, i have the hope that if we could really concentrate on fixing these things, then we could cover more areas on the revenue and spending side. david is right. we do have these things that should encourage us to do something. the debt limit. i would add to that, he did not mention the continuing revolution.

we know it expires march 1. we have a coming together of these things that should provide a very strong incentive to get something done in the longer run. >> i would echo just about everything you guys have said. i think the fiscal cliff is this false deadline. this is a crisis that is entirely created by congress and the president. you pick the right four things. the amt, unemployment, extended benefits, and i think there is a little more wiggle room on that one, but it is an issue, and the state tax. these things are critical. they have to be done. they will have to make some sort of decision as to what to do on

the sequester and tax policy. my recommendation would be they simply extend all current policy with regard to those two. they are running out of time. the president is going off to hawaii shortly. it is not the time to go through complex policy issues because you will give them the short shrift. they should accept them. when the cr expires, that gives them the more hard times when things -- hard deadlines when issues need to be addressed. these are strongly agreed to by partisan issues, raise the retirement age for medicare. subsidiesof threducing

and medicare by testing premiums, at a premium for part a. then there is further means testing that could be done in social security through a progressive indexing and things like that. those are the things that have been talked about around town. you could do a bill very quickly. does it need to be done in december? not if you extend all current policy. the important thing is that this makes a substantial down payment for long-term sustainability. to focus on 10 years, while important, it gets to those cash flow issues, it does not necessarily deliver the kinds of reforms that will be reducing our debt to gdp ratio and stabilizing it. i to not know why we are not hearing serious conversation about this from the guys negotiating. some of these things were included in the present's own

budget. they were smaller than i would have liked -- president's own budget. they were smaller than i would have liked. simple things to do. easy to do in a bill. >> part of the problem is if you only extend the four things mentioned, there is no down payment. >> right. you are not going to extend the tax policies. that will not happen. >> no down payment now. what i am saying is you have to do some of these other things. >> i would love to see that. >> let me tell you my concern. i do a lot of talking inside and outside the beltway. i am concerned liberals have misread the election and are overreaching. there is no question the president campaigned on more

revenues and more share for the wealthy. it is legitimate. to say he has more than that is not credible. what we are hearing right now is grand bargain-type numbers on revenues but not with regard to reforms in spending. they are talking past each other. the president said, we want to reach marginal. the fact is you generate more revenues, you increase the effective tax rate of the wealthy more than going back to old tax policy. it is more politically acceptable for republicans to go that route. it is more in line with comprehensive tax reform, which is where we need to go. i am concerned they need to get

real and focus on avoiding the cliff. they need to set targets for the grand bargain and focus on jet -- debt to gdp. >> i agree. i think allison is too optimistic. [laughter] i think david is right, the other side has become much stronger against any kinds of reforms to entitlement. both of us have been in meetings recently. groups have really come up very strongly about, do not touch my social security, medicare, medicaid, and so forth. what we have to do, one thing that bothers me about all of this, if you really project where we are going to a sovereign debt crisis, which seems to be inevitable if we do not change these policies, the people who are really going to

be heard are the poor -- hurt are the poor. 25% unemployment in greece and spain. imagine what the minority unemployment would be if we had a 25% unemployment rate on average in the united states th. we see pensions being cut without any notice hardly at all social programs slashed. -- at all. social programs slashed. there is at least some probability that will happen to us. i will say it is a certainty eventually if we do not do something about the situation. i would think they would be much more sober in their demand. at this them -- at this moment, i do not see it. >> i would say a lot of this is,

if we are talking inside the beltway, that is a different conversation. part of the disservice is the debate is having today is it is steering away from what the real issues are, the most depressing issue, i am more optimistic. it is steering the conversation away from that. it is not helping ordinary americans understand what the threat is over a somewhat longer term. i do not think we have 25 years anymore. maybe it is two or five. we get closer and closer every year that we build up our debt and every year that we postpone entitlements -- tackling entitlements.

the conversation the fiscal >> we had a political -- someone who ran the congressional budget office, somebody who has worked in the state budgets, people who can count, which is always a disadvantage in discussing federal finance, and yet, we come up with a consensus of things we all know we need to do. i am being a little bit provocative here, but i am worried about the fiscal finance in this country because i think we are getting a real break because europe is having the problems they are having and, as a result, the world has excess

savings and are doing the investment and do not have a great choice. they look at us and say, we are better. when we get downgraded, our interest rates fell. we are living on borrowed time. why none of the reason why they are playing political games when there is such a real issue -- why they are playing political games when there is such a real issue. we are self-dealing in our own debt. purges in over 70% of all new u.s. debt issuance fees. -- issuances. if you look at people who are buying our debt, their appetite is getting less, not greater.

they are buying short-term debt because of huge interest rates risks. if you look at china in particular, they are looking for corporate bonds rather than u.s. treasury securities because they do not like what they see. we are living on borrowed time. we have created another bubble. my view is the reason the fed is doing that is because the mandate was changed in the late 70's to where they have to be concerned with unpolluted with unemployment. -- with unemployment. we need a fiscal deal. the fed has to change its policy because both are imprudent and unsustainable over time. >> right. >> one of the most successful physical consolidations in the developed, democratic world in canada, in the mid 1990's, and

i ask the canadian politicians how did you do it? the public went from cheering on spending to deficits within a matter of a year or two. the government in canada now risks some peril if they do not balance their budget. the answer you most frequently get is all they had to do was say, 40% of revenues was going to pay the interest bill on the canadian debt, and the public and media realize that was not a great idea -- public immediately realized that was not a great idea. we cannot make that argument. we run these massive deficits and because interest rates have gone down, the interest bill has barely moved at all. it will not take much to change

that. even with the modest projections in terms of the interest rate increases they see over time, we are going to quadruple our interest bill in 10 years. hopefully, that will get attention. i almost regret the fact markets have not reacted more negatively to what we are doing than they have. >> if you are looking at $16 trillion debt in total, and interest rates at rock-bottom levels, if they go up 2.5%, you are looking at $500 billion a year in interest costs, which, the total deficit is $1 trillion. you are looking at increasing that by 50% if interest rates go back anywhere near their averages. you are right. do the math. again, i was asked in a panel,

somebody said if i could change anything out there on the tax reform, what would it be? i said, the understanding of the american people. the average american does not understand the tax code and they do not understand what it is or is not doing. the headline was that i called the american public stupid. i did not. they are not, this set of all of what is in the tax code. they are equally not cognizant of what is in the budget issue. they think you can balance the budget by cutting. i have seen a lot of educational initiatives go on, but they do not necessarily seem to have any legs. how do we get the american public to understand the debate we had here today? it was a lot more agreement than debate. >> alison and i participated in

a fiscal wake up tour. a fiscal solutions tour. now we are doing the next generation of that. we did in september and october of this year. what you have to do is build a burning platform. you have to understand the kinds of polls most politicians listen to our superficial and grossly misleading. when the public is asked, do you want to work longer for social security? do you want to pay higher premiums for medicare? do you want to pay more taxes? what do you expect them to say? my point is, when you build a burning platform case, which can be done in 10 minutes, and i have done it thousands of times, they get it. that is when you get 97% off to be the top priority, 92% agree on the principles, 85% weighted

towards the spending, so what does that mean? the biggest deficit this country has is a leadership deficit. we do not have leadership from our top political leaders. the president needs to use the power of the pulpit to be able to build that case. we need to take a book out of bill clinton's presidency in 1998 where he used this type of approach to be able to prepare the way for social security, and for this case, grand bargain. that is what needs to happen. let me give you three simple ideas for congress. no budget, no pay. i am serious. this is one of our mantra. if you do not pass a budget by the beginning of the fiscal year, you do not get paid until you do, and there is no retroactive pay and. california did it. had a behavioral impact.

no deal, no break. starting in 2013, they do not any recesses until they get a grand bargain. these people get seven times more days off than the typical american. if they got paid for performance, they would owe us money. thirdly, every member of congress should be required to prepare their own taxes. everyone should be required to prepare their own taxes because if they had to do it, they would wake up and we would get tax reform lot quicker. i ask people who prepare their taxes, less than 5%. as the governor knows, a lot of people, i do not get deductions but for two things.

interest's on a home mortgage and charitable contributions. nothing for state, local taxes. gone. g-o-n-e. people need to recognize where we are unchanged incentives. -- and change incentives. >> a lot of people have made this effort. on the other hand, when you see the kind of information the general public has, one almost has to weep. one way we totally confuse people these days is with something called the baseline. the definition is in the law.

they have to assume all of these tax cuts expire. that is so ridiculous, most of us use other kinds of baselines. we use a current policy baseline, which extends all of these tax laws. more recently, everybody seems to be able to choose their own base line. [laughter] the president has his own. bowles-simpson, as much as i admire what they did, they had a rather odd baseline, to, which assumes we did not continue tax cuts for the rich. no wonder the public is totally baffled by all of this. britishlook at the austerity program.

compare it to what would happen if you continued. it is quite a bit less generous in that. whereas we, when we talk about reforming social security, talk about cuts and benefits, when all we are doing is slowing the growth. if you look at the bowles- simpson proposal, the benefits for everybody continues to increase over time, not as much as for the lower income. we are so confused, it is surprising they have the vaguest notion of what is going on. >> you see this reflected if you

just look at simple polls. it is confusing. you hear tax cuts. we are not talking about tax cuts. we are talking about preventing tax increases. they hear all of this fighting. if you go out and engage in the public outside of washington, you have to get people who are working to take time out of their busy schedule. that is hard to do. these are really complex issues. you cannot boil them around to your little sound right -- sound bite. you have political leaders who are afraid to tackle major problems that involve benefits that will at some point affect everybody in this room and everybody in the country. that is hard for them to do and it is easy to demagogue it.

the one thing we should take out prettys the public' is disgusted at the way washington is broken down into total disrepair. the fact that you are not having a serious conversation on the part of the leadership, all three parts, about the fiscal cliff is a major part of the problem. we just had an election. we cannot stop campaigning. we have got this that -- this deadline. the debt is not artificial. no wonder the public tunes out. >> the right word you used is disgusted. if there was a mandate, the mandate was since the republicans returned to the house, the democrats to the senate, and the president was reelected, the mandate is, start

working together to solve problems. >> on that note, we will open it up for a couple minutes for questions. put your hand up, get the mike, identify yourself. go ahead. >> my question is, what advice do you have [indiscernible] that in five -- that provide insurance to the port. we are looking for alternatives for the future. >> government has grown too big, promised to much, but it is not too late.

the charitable sector will be more important, and individuals take more to us responsibility for their future. charities need to have that reality and figure out what they can do to improve their role and retain some level of support for charitable contributions. >> the problem is not what we promised the poor. the problem is what we promised the middle-class. our expenditures are squeezing the life out of the rest of the government. i think advocacy groups for the poor should be among the

strongest proponents of fixing these major entitlement programs, medicare and social security. we can do that without impacting the poor hardly at all. >> i think we have a myriad of anti-poverty spending programs in this country. they are duplicative. they do not all have good outcomes. as groups think about these issues, it is important to focus on outcomes, streamlining programs, and on ways we can strengthen civil society and the partnership between private charities and the relationship with those they help. the government is going to have a role. we want to have a safety net. we do not want incentives to remain that lead to further instilling low income.

the unintended consequences of great society programs. of separating -- by separating a reciprocal arrangement, welfare in exchange for work, that is -- those are things that further implicate behaviors that keep people in poverty. not only being engaged on the spending card -- spending part, what are the policies that are married to any of the spending programs that are important that will help more people get out of poverty. the only other thing that would go along with that is making sure we have programs put in s get to meet fundamental the economy growing as fast as they can to get more people back to work and to have better wage growth. >> we have time for one more

question. can we get a microphone up here, please? >> one fast comment. david passed a law saying legislators do not get paid until they pass the budget. it became a problem. the fed has an enormous amount of assets. if they were to let interest rates go up, the decline in the value of those assets would have a more shocking impact on our economy. is that not true? how do we ever get out if the fed is continuing to buy these financial assets at the quantity they are doing it now?

second, i agree with everything you all said. i did not disagree about the problem. to me, i would look at the way our politics are. there is such an amount of leverage on this process and those are the ones who are not compromising and they are driving, in addition to the lack of strong political leadership, they are driving an extension of the stalemate. >> i will answer your first question. the fed holds primarily short- term. right now, there is about $40 billion a month the fed is repurchasing. if they just stopped repurchasing it, they would start to unwind that balance sheet very quickly. the banks have read deposited

the proceeds of those funds and are getting paid 25 basis points. the fed can change that as well and unwind the bank's willingness to do this. just the run off would allow the fed to very quickly reduce their balancing if they chose. right now, in terms of keeping the economy going, the fed is the only ball game. what they are trying to do is not create lending by the bank at the retail and local and business level. what they are trying to do is recapitalize the bank. they are subsidizing the banks through the repurchase arrangement they engaged in. about a $35 million subsidy a year. that is an issue that is outside the issue we talked about here. it is one for another seminar on

the fed policy. we could start an argument on that one. >> i would disrespectfully -- i would respectfully suggest no retroactive pay. they might be able to borrow money for cash flows, but they lose the money forever. >> a -- >> a couple of points on the fed, i would not worry about the capital losses on the balance sheets. the central bank in the philippines had a huge negative equity. the central bank can go on without necessarily having a positive equity. they have all sorts of tools they can theoretically use other than having to unwind their balance sheet. they can increase reserve ratio, the interest rates they pay on excess reserves, and so on. they have a lot of control. that makes me less worried about

the fed's balance sheet. not that i approve of what they are doing recently. i think they can get out of it fairly easily. >> i would add the presence of this massive fed undertaking, in almost a desperate way, gets at the underlying problem. this is not a monetary policy issue. it is a fiscal policy issue. we have a lack of leadership. the threat of the tax policy expiring all tax policy, much of which has been in place to over a decade, has been a congressionally made thing. congress refuses to work on it until now. reich lot -- likewise, they have refused to tackle the spending part, both of which get us to our debt. you have this honor lack of anything happening -- utter

lack of anything happening response to bleed. tackle -- responsibly. we have to have things happening on the budget. we have to have serious steps taken and we need stability in tax policy. >> with that, i am going to call an end to this. i think it was a good discussion. we could go on for hours. but i think it is important to understand the one commonality all of us up here share. this is real. it will have real impact. we know what the solution is. everybody who deals with it knows what the solution is. we are arguing whaere could lean

one way or the other, and while we are doing that, our country and the economy are suffering. we need the leadership. we need the congress and administration to come together and to find the commonalities laid out here and move the country in the right direction. it does not have to be a perfect answer. there is a lot we could do to make the situation better than it is now. i am not sure we are getting anywhere on this one. i want to thank the audience and the panel. we will call an end to this. i will let you all go out and contemplate what they said here today. thank you very much. [applause]

>> now, the chambers of commerce forum. the chief of staff discussed their physical challenges. it is just under an hour. >> thank you very much. thank you for being here this morning, especially those who traveled to be with us. it is nice to close the doors from the rest of washington and talk about fiscal challenges elsewhere, whether good news or bad news. it gives us an opportunity to talk about something a little different than the news of the

day in these final two weeks before congress finds an opportunity to either avoid or move or solve some of the fiscal cliff issues and fiscal challenges we face. thank you for the remarks earlier and the work and the commission he co-lead. -- co-led. i encourage everyone to take a close read. it is filled with good analytics. i fully agree with your comment earlier about the disco -- the disconnect. we are facing our own serious challenges. they seem so overwhelming that

the notion of adding in a layer of complexity, to think about the consequences outside of washington may seem overwhelming. there is some of that work that gets done. but i agree it is often inadequate and often comes too late in the game and does not weigh on policy maker's mines -- policymakers' mineds. specifics from practitioners from folks who do know what it is like in the different states. let me briefly outline.

i will introduce the chief of the staff for five seconds each. give them a few minutes to share their views. the floor will be yours to talk about whatever issues that you think are most important to describe your own successes and challenges in your state. i would like to ask dick to then respond. compare and contrast the comments with the research he conducted we will have a brief discussion for a little while. i will pose a few questions and we can open it up to the floor for breyer -- for a broader conversation. let me know who is here with us. to my right, martin, the chief staff to government -- governor bob mcdonnell spiri.

at the end, roxanne white joining us from colorado. so, their full bios are in the pamphlet on your table. >> first, thank you for the report. it provides a good framework to continue to look at the challenges facing us. we have been engaged in pension reform in colorado. our pension fund is about 69% in solvent. we did major reform and now we are in court trying to defend that reform. our pension costs will go to 22%. to give you a sense of how far behind the war, if we lose in

court and the battle is whether or not we have a right, we could see a need to go to 25% of compensation by 2020. it is important to get through the litigation. we are very concerned about medicaid costs. they are about 20% of our budget, growing at a rate of 8% per year. we are very engaged in putting everyone in medicaid into eighth -- and affordable care collaborative. -- in an affordable care collaborative. we believe the exchange offers the opportunity for two things. it was largely supported by small businesses in colorado to help them to be able to afford insurance for their employees. there was a very bipartisan

effort to move forward. we are looking at cost containment there and how we get everyone into a managed-care type situation. we have 17% of our population that drives 67% of our medicaid costs. it is almost a exclusively -- almost exclusively our aging population. it's a small number of people driving our costs. the final thing we are doing in terms of local government is our department of local affairs is working on consolidation, trying to get our fire departments to consolidate at the local level.

not forcing to do that, but prior to becoming governor, the mayor was able to consolidate in the region, our fire departments and pieces of our police departments and pieces of our road improvement. really saying to our local municipalities one of the first executive orders we did was a no unfunded mandate. we are doing our part of not trying to pass on additional costs. you have to do your part of really trying to control costs. we think our municipalities are in serious trouble. the last thing we had been doing is we have had a 22.7% increase in personal income. we believe a great deal of that is one-time money. we have been working with our legislature. we have gone from 0% to 8% reserves in all our budget. 5% on restricted reserve and really working with our

legislature with what we see as one time money being only spent on one time costs. we are engaged in that fight on a daily basis of trying to an create a better sense of how we fund things. not just spend everything but having the state have reserves. that is where we are at in colorado. >> why is that money one time money? where is it coming from? >> capital gains. looking at things like water quality improvement, deferred maintenance, local municipality, but we really do not think it is sustainable revenue yet. >> when the governor took office, we did not have the shortfall that some states do. we did not have the best budget picture. her promise was to create the

best business environment possible, create more and better jobs, and to make government smaller, smarter, and more efficient. we did things like that, agency consolidation, high tea consolidation, some of those common sense approaches that you would do more often that we do not see. those are things that are saving us millions of dollars. our i t consolidations are estimated to save $100 million over the course of the term and potentially next term. we also, in the same situation, have $2 an hour rainy day fund. -- $2 in our rainy day fund. it is really thinking about how we do things smarter, more

efficiently, and using the technology and resources we have to make things more efficient and cost-effective for government. we reduced by $5 billion by passing a law that says we could not pass what was not funded. ours was not challenged in court, fortunately. we are looking at more pension reform. we have seven pension systems in the state. they are operated by different pension boards that have different rules, different structures, looking at the potential of having them under one board that monitors all of the pensions so you have across unanimously.animously th

one of the things we have done in the state of oklahoma is our transportation secretary, we took down a 9000-foot bridge in oklahoma city. over 1900 steel beams were read purpose and recycled for local counties to get rid of structurally deficient bridges. we will go from the bottom to the top in terms of creating that infrastructure. we are literally recycling and saving millions of dollars by something that would have just

been thrown out. it is the only project like that of its kind in the country. we are proud of it. the other thing we are doing is roxanne's governor, tom mentioned before the third bucket of energy. an initiative was created to convert. the governor is supportive. we went to detroit with a group of certainty and -- a group of the -- group of 13 governors signed. we want to convert and produce as a state vehicle and give us that ability to do that efficiently and we will give you the market. we will put up 5000 cars we commit to buying and we will save our state dollars by the fuel efficiency, but we also have the added bonus of creating jobs in our state as well as

energy independence. it does not make a whole lot of sense to buy country -- energy from countries who are not -- that are not stable. independent energy dependen by 2020. the innovation is coming from our business owners in this state and across the country. the more we can do to use that, the better off we will be for it. oklahoma has been second in job growth since the governor has been in office. we are one of the lowest states of unemployment. we have had the fourth highest in capital income. we feel like the things we have been doing in office are

preserves it -- are producing the results. the fiscal cliff will have that.ating results on thaeffecn it was unsustainable for us to carry on the costs without facing major cuts in education and transportation and public safety. the aerospace and defense industry and our state are looking at 16,000 jobs if we go off the cliff and sequestration occurs. we do have some good things that are happening. some other things that are potentially not so good. >> one quick follow-up. what did detroit say? >> absolutely. we put it out there.

i am not the expert. we have a half-ton truck out there now. we are looking at a three- quarters truck. we are looking for more vehicles that are under production. we actually already are purchasing some of those. our entire department of transportation will be over the course of the next year. >> thank you. thank you again for the opportunity to be here to speak. what we are doing in virginia, we are doing a lot of those things in virginia, as well. we had the fortune of an incoming governor inheriting a by annual budget from the outgoing governor. when the governor came into office in 2010, we inherited a budget sword fall -- shortfall of about $6 billion.

the very first thing we did the moment after he was inaugurated is we came into office, we rolled up our sleeves, and figured out how we would fill that hole without raising taxes. the outgoing governor had proposed approximately $2 million in personal income tax increases. the governor,te from working with the finance sector -- secretary, was to find ways to cut costs, and to do it without raising taxes. we did that. i am proud to say the governor, through his leadership, not only did we erase the deficit, but we wound up with a $400 million surplus in july of 2010. we have had surpluses for each of the years after that.

we had one in 2011 and again this year in 2012. they average anywhere from $550 million to the lowest was in 2010, $450 million is the average over that time. one of the biggest things we did is came in, and health care costs are escalating. the governor put forth policies he believes encourage and incentivize state government to not operate as usual. a couple of examples. we came and the governor put in something controversial in 2010, particularly with some of his friends in the legislature, a bonus plan. what we said is state employees, you figure out how we saved money at year-end, break the cycle, figure out how to save

that money, and we will return up to 3% of that to you as a bonus. we saved three times the cost of the bonus. it was a success. in 2011, somewhat different. the governor told state agencies you find ways to save money and returned it to us iand we will return a small percent of that to you. we were very successful in doing that. significant in hundreds of millions of dollars more returned that year in savings. this past year, the governor redid the bonus plan. it cost about $7 million and we returned again well over twice that cost in savings to the state. the governor has really ramped up. there has been controversy. ramped up the use of public --

to outsource some of the functions in state government that have quintessentially known the been known to be functions. we have saved hundreds of millions of dollars in doing so. we are returning the money to the bottom line. much less -- much like he talked about, we came into office, the rainy day fund, including what the governor will announce next week in his neck -- next budget announcement, we will be well over $700 million in the rainy day fund. the effort is to bring down those tuition costs. they have been escalating in virginia like in every other state. we are honored to have a great higher education system but the schools are becoming unaffordable for residents.

once again, the public-private solution was in place. but the governor told college presidents -- ok, the state will put in additional money, but you have to cut costs every allocate up to a percentage of what you are getting back into students and schools. not into building more buildings but to put it into the school and the students. governor mcdonnell's mantra is to hold state government accountable for expenditures, to expect more, and permit private sector solutions. we have been fortunate to bring down the unemployment rate to 5.7%. it was about 7.3% became into office. we will be disproportionately impacted in virginia but what will inevitably have to occur in d.c. and that's cut.

we have a huge defense sector in virginia. there are estimates out there of a job loss of over 150,000 jobs lost potentially as a result of sequestration. we are putting into place measures to adjust that. last year with some of the excess funds, the governor created a federal action contended she -- action contingency fund. we are putting money into a fund where the governor has brought this question. unlike the rainy day fund, based solely on drop in revenue, the other fund is intended to address cut and areas to put funds in particular sectors to offset those cuts and incentivize the private sector to come back in. we are really try to work with a lot of private sector solutions in virginia to address the challenges we have.

we are ready for the challenge. we are going to do our part with the balanced budget. we must balance our budget if it requires cutting, that is what will happen. we tried to be very conservative in our revenue estimates, knowing these things are out there. with the uncertainty in d.c., it is difficult. we talk to the leadership and general assembly. we could come back in late january, early every depending on happens and we may have to make significant changes. one of the last things we did was the governor had we send out a request to all agency heads to submit a plan for 4% of reduction of your state agencies. we are holding some of that in advance, knowing that we may need that come january or february. >> dick, are these

representative states? >> one of the great things about this country is i do not think any state is the same as every other state. i think these states are smaller states. rural states. states in which public employee unions have less leverage than the politics which makes a big difference. i think where the infrastructure needs arno werner as great as they are in the states that have several cities which require massive public transportation mechanisms, but the fact that though those analyses are not there does not diminish in anyway the steps these states have taken to keep their fiscal house in order. having rainy day funds is

critical to take care of the enormous situations that occur in budgets and the economy. i think he cannot lose sight of the fact that one of the reasons you have a smaller medicaid expenditure is because of the federal formula which favors some states because it is not a based on the actual need. it is based on a median income calculation. as a result of that, a state like new york are california, has a lot more poor people and a lot of rich people so it does back at the same break. i think you get 60% reimbursement from the fed. you get 50% -- oh, it's you who gets 60%.

in new york, we only get 50%. it makes a big difference. someone ended up saying it is all of james madison's fault. there are couple of things that are terribly important that cannot contradict anything that you all said. we do not have a good way of measuring the adequacy of our emperor structure. we know that the chinese spend eight times as high you're a percentage of their gdp emperor structure as we do in this country. that makes us less competitive. i think i learned from the people in the chamber here that

the cost of moving goods in the united states is greater in off to the dollars that it is in europe or asia. therefore adding to our lack of competitiveness. i do not know personally how you grow a real economy without being able to produce goods in a competitive way. i think that it is important to also understand that there are so many factors that go into the adequacy of an educational system. you referred to consolidation. absolutely critical. new york state, there are 650 school districts. a lot of them, each of them has one school bus or several how one school bus and the

commissioner of transportation. >> oklahoma, we have five to 21 school districts. as tiny as we are. -- 521 school districts. as tiny as we are. >> it is hard to change that but there is an enormous redundancy in extent -- in expenditures. that has to be addressed. also, the nature of the population varies. that has an impact on the quality of education. the ability of schools to teach. we have to recognize that 50 years ago, we had -- there were not many opportunities for women or women-running states. the greatest opportunity professionally women had were

teaching. now they are out doing [unintelligible] but there is not a national solution to that. last of all, let me say that one of the reasons that states are in trouble is because they have borrowed against the feature to pay for the present. when i was in albany, i watched one major financial institution after another, and say we will solve your budget problems for you. we will discount your future revenues.

if we can borrow against the future, then we do not have to tax. i would respectfully submit to you that there are tens of billions of dollars around this country that -- where future revenues have been hypothecated to solve today's budget problems. that could be stopped. it could be stopped-to torelli - rially.o last of all, somebody raised the question about what happens -- should the federal government do anything?

i did all the negotiations on behalf of new york in 1975 with president ford, bill simon, degette federal help. it was a good thing that ford waited as long as he did to step in. when he finally stepped in, he was able to do something that made a difference without imposing any financial risk on the federal government whatsoever. he was able because he waited until the last possible moment to impose discipline on the state in consideration without providing something that wasn't even cast. they took back a lean on every dollar the federal government transferred to states and local governments.

the facts never came about. i'm not advocating the federal government extend credit or write a check. i am saying that there are ways in which the federal government can politically in a sensible way put discipline on the process. if they wished to. every politician in new york, the unions, the tanks, everybody did what they swore they would not do. so whether the discipline comes from laws or the ability of somebody else to take something

away if you do not behave in a responsible and prudent fashion, these problems and dollars we are talking about is sufficient consequence to require careful examination of ways to keep this society together. >> let me interrupt you right there so we can get a chance to bring everybody in. i wanted -- want to thank everyone for their remarks. in the opening remarks, i want to throw a few questions to you. in particular, given the, about the match and how it varies. would you describe on the health care fund is innovative. the problems on the federal level for finding ways to

deliver health care. one of those approaches that is talked about a 10th of the affordable care act is the authority to experiment with episodic payment spiritous a to a physician you do not get paid more by doing more. you'll get paid for treating the patients in a way that patient needs to be treated. you are doing that. in colorado, despite the fact you have it fairly generous f map. tell us where that came, and how that is going. >> just because we have a more generous f map does not mean costs are not a primary issue for us. they are very much. it has allowed us to move forward with some expansion and exchange. but it does not mean we can

ignore the cost containment issues or the fraud issues. we are also working aggressively but the federal government on return visits and when the hospital releases and how we take away dollars it people leave the hospital and have to return. really looking at the whole arena of patient care. the other thing we did 18 months ago was we went to all medicare patients having a copayment on every visit. it is not a significant copayment but we have significantly changed our medicaid emergency room visits by the use of co-payments and a higher co-payments. it is not that significant but for income, it is significant. it is a mere $5 and we have reimbursed our over use of emergency room visits by simply

charging $5. we have a neighbor -- we have been able to drive change. it does not take that big of a carrot or stick to change behavior. really going to a place of, just like everybody pays a portion for their health care, so to medicaid. try to jack behavior and also driving behavior on the positions side. -- trying to change behavior and also driving behavio on the oppositiophysician side. cox in oklahoma, the head traditionally and unemployment lower -- hethey traditionally hd lower unemployment.

some states have standard a collaborates that are much higher. things from that perspective are fairly good in both states. the unemployment rate has fallen in all three states. particularly in oklahoma and virginia. as more people go back to work, people are hang taxes -- are paying taxes. \ there is a political temptation to recognize the changes and capitalize on them but sometimes it is just good luck. to what extent do you attribute the successes on the state level to policies that have been put in place versus the natural business cycle? >> one of the biggest dissections is certainty --

distinctions is certainty. the fear of businesses have with the federal system. businesses are not willing to expand and invest and do that because they do not know what the situation will be with the federal system and the economy. the difference in oklahoma is that when people locate -- then know the path we are on. they know the governor's plan is to continue to review red tape and regulations on businesses. we have a quarter point tax cut the first year he was in office. we will advocate for continued lower taxes in all -- in oklahoma. we were not successful last year but our mission is to be successful. so businesses know the environment they are creating will be one that will be conducive to their expansion. i think that is why we have had success.

but on it -- on a national level we may not see. >> as far as virginia, there are some factors which make it unique. obviously proximity on the east coast. the fact we have a lot of major interstates that run through virginia certainly benefit us. in going to her point, a lot of it is a certainty. we are also the northernmost right to work state on the east coast. that is a tremendous benefit to us as far as attracting businesses. in addition, hampton roads, we have the largest deep water port on the east coast. we are planning to take full advantage of the panama canal and the changes coming there soon to bring commerce into virginia. we are aggressively building our rail system, going from the port of virginia west to get that traffic out west. we just announced that we are building and other highway, a

tall access highway. one of the primary purposes is to bring truck trafficking from the port of the virginia inland a connected directly with i-95. that will help us bring newcomers in. i want to mention something that has been a little tabooed as of late. the governor is not ashamed of it at all. we have taken full in of it. that is incentives to business. the governor has put significant additional resources into our virginia economic development partnership. funds he has at his deposal -- disposal but also resources to build up infrastructure we need to do in virginia. the was a piece in the new york times recently that criticized the use of that. in virginia, some of the things that were pointed out as concerns, the fact that they neglected to invest in higher education, we are doing that in britain. states are not keeping an eye as to where these resources are

going. we are aggressively pursuing call back on any funds we get to the private-sector. we are looking to build a power structure in virginia. we are definitely a fortunate to be where we all are in the east coast, to have right to work laws, our proximity with the port. it is a combination of certainty, a little bit of good luck, maybe, proximity, but an aggressive governor. i have to give our generally assembled -- general assembly credit. it is a combination of all this. >> one last question the ribble open it up to the floor. i am a tax guide but on the federal level primarily.

your comments earlier we think about tax reform, the mantra is bought and the base. there is a lot of interest that was key to the simpson bowles and a lot of other proposals. those can have other consequences. they are mixed. you talked about the debt -- the deduction. in my view, it is a subsidy. but it is a policy at benefit to states, particularly those with high income tax rates. the mortgage interest deduction is one of our largest expenditures. as the federal government were to broaden their tax base, so

too with the state. there would have a benefit. let me ask two questions on the task force. dick, you alluded to both of them. one is the amazon issue. big effort on behalf of the state to advocate the federal legislation to facilitate the collection. are those issues here states are advocating for or working on behalf of? do you see that as a large revenue opportunity for you? on the federal tax reform thought, to what extent you see opportunities are risks from base broadening? >> i think your point is correct. there are some tax expenditures which eliminated, states will benefit from as well.

i think each of these stand on their own hook, so to speak. you have a whole series. if you look at a chart of what states follow the federal tax code and in what respect. a lot of them follow some parts of this law and not all of them. some the for on state taxes. -- some differ on state taxes. i feel that spending money, whether it is a tax expenditure for an appropriation, to get somebody to go from one jurisdiction to another, given the problems the united states of america faces today, is not a useful expenditure and unlimited public resources. i know that flies in the face of a lot of states who wish to

bring in jobs. but if you bring jobs in by offering all kinds of tax abatements and exemptions, as new jersey did recently, -- it is a zero sub game. they are -- there are no ways to commit the obligations? years ago, the was a silly program in the carter years were states used to buy the business to move from one state to another. >> just have a chance to comment. i want to bring it that everyone else to request our small businesses have asked for equity with the amazons of the

world. we have been doing some of that. we have been very clear with our taxpayers. it would not ask for tax increases and lease -- until we did to the degette personnel reform and after 11 times of our voters turning down the ability to take our personnel rules out of the constitution. we said that was the first thing that had happened to the second thing we have been able to do is lean all aspects of government and required our department -- they cannot ask for any money that had been cut before from consolidations and could not replace any leading efforts. bolkiah said to our taxpayers is

we have not clean our own house yet so we would not be asking for additional revenue -- what we have said to our taxpayers is we have not clean our own house yet so we would not be asking for additional revenue. estimates of .5%. that would be significant for us. we are keeping a very watchful eye. my governor. we were here last week meetings the speaker and president and harry reid. what they do will have significant impact on our state. the state's offer a lot of good ideas and things that the guys in d.c need to listen to. they lose sight of the impact of all those things will have on

the state. a lot of the things that will not have a lot of advocates for listening. been more than likely will be on the chopping block. rex a lot of the things roxanne and denise said are true in virginia as well. we will likely continue to be a traditional state. just the governor -- w3e addressed the governor. we just got a large infusion of new jobs from amazon very and began to collect the salesmen use taxes. allow the states are waiting to see what happens there.

we have positioned ourselves to deal with that. one thing i did not point out is -- we have -- we came into office with a significant challenges to our pension system. the governor has done a couple things. we reform our pension system. we have gone from a defined benefit plan to a hybrid plan, effective 2014. for new employees carried with it we have eliminated or minimize the legal challenges we know will probably come. secondly the governor, with some of these savings, put hundreds of millions of dollars back into our pension system. they are a serious problem. we will have to continue to watch that closely. we will wait to see where the chips fall.

we will be prepared for things like the fact fund, extra reserves to try to have as much liquidity as possible. >> i would like to open it up to the floor. there may be other topics that have not come up here. there is a microphone here. >> please adjust state your name and make it -- the question brief. we are a little short on time. >> i am sam gilbert, and member of the chambers employee benefits committee. one of our last meeting, we have a representative from indicate. medicaid costs will significantly increase. the question i have is it seems

that with, municipal financing has seen its brighter days. what are the efforts of alternative, public-private? >> let me take two questions together. this woman's right here. >> i am a representative for nonprofit america. what are the partnerships you are having with the department of labor, the epa, with regards to helping small businesses, primaril. >> by the partnerships, federal partnerships and partnerships

with nonprofits in the states. >> it's a very appealing concept with the truth of the matter is that if you want to build something and it will cause it -- x dollars, you want to service the many pay for it. particularly if the revenue you are going to use to pay the debt service. it will come out of general tax revenues. it will not come from any other place. the fact you have private enterprise and the infrastructure bonds is

perfectly sound for projects that are optional, in my view. but it is not a solution for an essential mass transit subway system or bus system. i remember when i ran the mpa in new your, people would ask me all the time wise open 24 hours did it -- a day. that answer is so all the people who clean your homes and offices can get to and from their. you cannot run most of these public facilities on the basis a purely economic soundness. if you were governor or mayor, you would want to borrow the money as inexpensively as you can. if he were using general revenue dollars for that service or

charging people and there are tuition or feed, you would want those as low as possible. >> anyone want to take issue for that? we are aggressively using them in virginia. >> our laws are ppt laws. put on the books a little over a decade ago. we used a ppta to bild a new interstate 460 in virginia which will get traffic. in its primary design, it also

could be used for vehicles trey to get a chance for vehicles, goods and services quickly to other access points to a the be taken out by rail or go on the interstate system, we are using it in the education arena. it is being used in the virginia to build schools. it is being used for a lot of different purposes in virginia. we find we cannot do it alone. there are issues that come along with that. for example, some of the ptda's. -- ppta. they will continue to be responsible for maintenance on that long after it is complete. maintenance costs alone in transportation has skyrocketed.

the cost of petroleum, in the last years, it is increased by 350%. >> there are costs that you can contract with the private sector. it takes that issue off the books and allowed to put those funds in other places. but i know there was another question. we are well over our time. with that, we will conclude this panel. we will move straight into the next session terry i would like to thank the protest against further time. we did the participants for their time. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> an update on the fiscal cliff negotiations between the white house and congress. we will hear from john boehner, house minority leader, mitch

mcconnell and harry reid. >> the white house was very controversial. the person who designed washington city -- it was competition. americans were not having a palace. it was not particularly awe inspiring. and did a 21 a european diplomat said it was neither large nor of inspiring. -- nor awe inspiring. >> vicky goldberg has gathered a few of her favorite white house photos in the white house watched sunday evening at 7:00 today on pacific.

>> shortly after the house committee session, house speaker john boehner spoke briefly about the negotiations to avoid this it -- the so-called fiscal cliff terry he and president obama spoke on the phone this evening after both sides exchanged new proposals. >> most of it was based on testimony given last dear -- lasest year. we have to cut spending. he is right. washington has a spending problem. we are broke. approach. a lot of people know that the

president and i met on sunday. it was a nice meeting. it was cordial. we're still waiting for the white house to see what spending cuts the predent is willing to make as part of the balanced approach that he promised the american people. where are the president's spending cuts? the longer the white house slow walks this process the closer our economy gets fought fiscal cliff. -- gets to the fiscal cliff. here's what we know. we know that the president wants more stimulus spending and an increase in the debt limit without any cuts or reforms. that's not fixing our problem. frankly, it's making it worse. on top of that, the president wants to raise taxes on many small business owners. now, even if we did exactly what the president wants, we would see red ink as far as the eye can see. that's not fixing our problem either. it's making it worse and it's hurting our economy.

think the members know i'm an optimist. i'm hopeful we can reach an agreement. this is a serious issue and there's a lot at stake. the american people sent us here to work together toward the best possible solution and that means cutting spending. if the president doesn't agree with our approach, he's got an obligation to put forward a plan that can pass both chambers of the congress because right now the american people have to be scratching their heads and wondering whe >> nancy pelosi reacted to commons, say democrats are ready to bring a bill to the floor. -- ms. pelosi: thank you very much, mr. speaker. i'm glad that our speaker has brought the fiscal challenges

to this floor. it's been long overdue. we have been calling on the speaker to bring forth middle-income tax cut now for a very long time. in fact, since last summer when it passed the united states senate. the president stands ready and poised with his pen to sign it. democrats in the house have a discharge petition to bring that bill to the floor. what stands in the way is an act on the part of the republican majority to bring a middle-income tax cut to the floor of the house. which across the country has almost universal support and which i think in this body, given the right to vote for it would have overwhelming support. up until know, everybody in the country, in pact in the world, have been talking about what's going to happen, those who pay attention to such matters, what's going to happen to the -- in the budget debate in the congress and witthe president . at last that subject comes to the floor.

what i would respond to what the speaker has said, though, is to set the record straight. the fact is that the president has and democrats agree with him agreed to over $1.6 trillion in cuts. in the budget control act and other acts of congress in this particular congress. $1.6 trillion in cuts. where are the cuts? they're in bills that you, mr. speaker, have voted for. secondly, on the issue of the entitlements, with the affordable care act and with legislation and the president's suggestions, provisions in the president's budget, it amounts to over $1 trillion in savings in medicare. over $1 trillion in savings which have been redirected to prolonging the life of medicare, making it stronger for nearly a decade while

increasing benefits for our seniors and those who depend on medicare. not reducing but increasing them. there's been a massive misrepresentation about what that is, so i want to set the record straight. so in terms of spending cuts, we're on the record having voted for over -- about $1.6 trillion. in terms of entitlement reform, over $1 trillion already and more savings to be gained in further discussions on the subject. strong down payment. what is missing are two elements that the president put forth in his budget -- growth, investnts in infrastructure. yes, the president has called for investments in infrastrture, to build the infrastructure of america and to create jobs, to grow our economy. and where are the revenues? where are the revenues? regardless of the cuts, the changes in entitlements, more

is demanded in terms of what seniors would have to pay into medicare and at what age that would happen while the republicans refuse to touch one hair on the head of the wealthiest people in our country. e public overwhelming, 2:1, supports the president's initiative for extending the middle-income tax cuts whereby 100% -- 100% of u.s. taxpayers get a tax cut. above $250,000, pele making more than $250,000 a year will be asked to pay a little more to pay for the fiscal soundness of our country,o pay for our country, the support of our troops. the pillars of security for our niors. the education of our children.

for the safety of our neighborhoods. this is just asking them to pay a little bit more while they continue to get the same tax cuts that everyone does. 100% of the american people get a tax cut, the upper 2% are asked to pay a little bit more. so i thank the speaker for finally at least uttering the words on the floor of the house about what is -- what the decisions are that need to be made. again, we committed to the cut. we acted upon the entitlements. the president has more in his budget. alof this would be a down payment for as we go forward into the next session of congress to talk about tax simplification and fairness, how we can have lower rates while pgging up loopholes and having a tax code that is -- encourages growth in our country. but that's along the

discussion. as we address the issue of how we strengthen our entitlements, not by diminishing benefits but by getting more for what we are spending. so social security, any changes in social security should be left to strengthen social security. if it's medicare, any changes should be there to strengthen medicare, not to underwrite and subsidize tax cuts for the wealthiest people in our country. so, again, i welcome the speaker's statement that he wants to solve the problem. the president has put forth his bufpblgt which has his initial -- budget which has his initiative in it. heaid he's willing to make some changes, but it's really important that any changes not hurt theiddle class. it comes right down to this. again, i've said it's not about the price of the high-end tax

cuts. it's about the moneyhat it generates. . it is not to burden the middle income in order to have bigger tax cuts at the high end. those high-end tax cuts only increase the deficit. they have not created jobs. it's simply unfair and it doesn't work. so hopully the clock is ticking, we are getting closer to the holidays, and that means closer to the end of the year, which is fraught with meaning in terms of time and the rest of this. i don't think there's any reason for us not to come to the table to make an agreement, to give confidence to consumers in this holiday season, to the markets at their end of the year decisions so that we will have the growth, the growth, the jobs that prode revenue, that job, that approach is the way to reduce -- reduce the

deficit. create jobs to reduce the deficit. want to fix the deficit? grow the economy and do so in a way that makes responsible cuts , strong iestments for our seniors, pillars of economic security for them and for their families. it is not a time t inject even more uncertainty into the lives of the american people and the economy of our country and what that means globally. it simply isn't the time. many of these ideas are bad at any time, but they are rticularly harmful at this time. so again, i thank the speaker for bringing the issue finally to the floor of the house of representative i look forward to how we can move quickly because time is of the essence and every day that we can remove all doubt about the full faith and credit of the united states of america, our investments in the future, our creation of jobs, and our respect and support for the economic -- and help the

security of our seniors. every day we can do that, put >> mitch mcconnell said tax increases for the top to% would not resolve the fiscal cliff issue and would only run the government for less than a week. he spoke to capitol hill reporters this afternoon. this is about 15 minutes. >> could afternoon, everyone. this is the week we will find out whether the president is serious about cutting any spending at all. we are basically running out of time. it is time to see whether the president is willing to cut in spending at all and whether he is willing to lead his party in

the direction of making an agreement with us. over the last few weeks, senate democrats have ruled out any spending reductions at all. if you look at the problem we have, it is overwhelmingly that we spend too much. we spent all of our time and you have written about it, talking about increasing taxes on the top 2. even if you did that, it would provide enough money to run the government for about eight days. clearly that does not have anything to do with the get expanding in line. i think you're out of time. we will find out whether the president is willing to agree with us to cut in government spending whatsoever. >> the other thing i would like to remind everyone of is that in raising the top to tax rates, some folks are forgetting that

53% of the income collected from those to rates come from small business folks. the almost 1 million small business owners who paid their taxes, not as corporations but as so-called flow through entities with individual income- tax rates. they hire about 25% of the entire work force in the country. this is not an insignificant group of people. when the president talks about raising the top tax rate on the wealthy, people need to call him and ask him the question, are you also talking about the small business folks? if he is, i think almost all economists would agree, to raise taxes at a time of the economy was not performing well would be a blow to the economy. why? so much attacks rate increase would stem -- so much of the tax rate increase would fall on

these small businesses. when we talk about the rate increases, we are not just talking about top marginal rates. we are talking about things like the estate tax. on january 1 if we do not do anything, only $1 million is exempted and the rate goes to 55%. over half the value of your small -- farm or small business will be confiscated by the u.s. government. does that mean small business folks? with the state tax? those are questions that need to be asked. >> let me come back to what the president said at his post- election press conference. that is his number one priority was going to be jobs and the economy. we agree with his goal. how he is going about achieving that goal is a different matter.

if you look at what he is doing, raising taxes on small businesses would be nearly 1 million small businesses that would see their taxes go up. they employ 25% of the work force in this country. there are private studies that say it will cost the economy 700,000 jobs, reduce economic growth by 1.3% and take-home pay by 2% if taxes go up on small businesses. is the president just obsessed with raising taxes? that seems to be the case. when you do the arithmetic, you will find out very quickly that raising the top to rates brings in enough revenue to fund the government for less than a week. what about the other 51 weeks? we spend too much in washington.

we at the reform and time programs to save and protect social security. those are the area of the budget that have to be restructured. perhaps even more important -- where is the president? he is out on the campaign trail. every day we are a little bit closer to the fiscal cliff. every day republicans are here, speaker boehner is here, leader mcconnell is here. ready for business, ready to do something that will avoid what everybody agrees would be a disaster and yet the president seems to be content with traveling of around the country, doing a victory lap or something when he should be here sitting across the table from the people who can help us avoid a bad situation for our country economically. mr. president, you said it.

we agree with that. now let's get to work and try to fix it. >> for people who spent a lifetime building a small business, small communities have a florist or a cleaners, those businesses will be impacted. many of them will not be able to continue to hold that business of the family if they have to pay 55% of everything in value over $1 million. erratics so many of these communities are farms and ranches. for those farms and ranches, they have survived through famine, flood, drought, fire. they face all sorts of things over the decades and the biggest threat has been from the government.

now as he raised the tax and put together a paper with the number of farms and ranches that would be impacted, of the 2 million in the country, there are only 100,000 of them with access of over $5 million. when you drop that number down to 1 million, over half a million farms and ranches would be impacted. many of whom would have to sell out after generations. but the republican leader said on the floor today that 10 years ago in 2001, the federal government but $1.60 trillion. 10 years later, we have managed to double that. this is clearly a spending problem. the president over and over again has said over the course of the campaign, we needed a balanced approach but we are

very specific on raising taxes. no specifics on cutting spending. no specifics on the sequestration. when was the last time with her the president talk about the sequestration? it does nothing like a balanced approach. you have spending cuts and that will be part of the discussion about revenue. or that it doesn't solve the problem. this is basically when the president get the tax increase. the marriage penaltiess, the child tax credit, all are things the country has to have everybody, 98% of the taxpayer

that benefited from those policies we put in place in 2001. the only thing that seems to be solved and the problem is a week or so worth of revenue and no real discussion about what to do about spending. that does not sound like a balanced approach to me. >> everyone knows there is it is bidding governing and campaigning, although the president cannot seem to give up campaigning. we get it, he won the election. now the american people expect him to step up and deal responsibly. one of the best indications that he is not serious about solving this fiscal cliff is his demands made for additional revenue without any commitment whatsoever to use the additional revenue to either pay down the deficits are the debt or to use it to shore up social security

and medicare. the american people expect us to deal with this responsibly and not just suffer what some have estimated would be a 10% drop in the value of the stock market if we go off the surface -- the fiscal cliff. the president needs to reconsider what this might do not only to the thousands of americans who would be put out of work and harmed but also what it would do to his second term in the office. >> what are you looking for from president ford agreement to avoid the fiscal cliff? >> i have said repeatedly, and most of my colleagues as well -- on the entitlement reforms needed to